Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21861 

INFORMATION CONTACT section of this 

document. 

LaNita Vandyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel, (Procedure and Administration). 

[FR Doc. E8–8815 Filed 4–22–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–109367–06] 

RIN 1545–BF52 

Section 1221(a)(4) Capital Asset 

Exclusion for Accounts and Notes 

Receivable 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Withdrawal of notice of 

proposed rulemaking. 

SUMMARY: This document withdraws a 

notice of proposed rulemaking relating 

to the circumstances in which accounts 

or notes receivable are ‘‘acquired * * * 

for services rendered’’ within the 

meaning of section 1221(a)(4). 

FOR FURTHER INFORMATION CONTACT: K. 

Scott Brown, (202) 622–7454 (not a tollfree call). 

SUPPLEMENTARY INFORMATION: 

Background 

On August 7, 2006, the Treasury 

Department and the IRS published in 

the Federal Register (71 FR 44600) 

proposed regulations § 1.1221–1(e) 

under section 1221(a)(4) of the Internal 

Revenue Code. These regulations sought 

to clarify the circumstances in which 

accounts or notes receivable are 

‘‘acquired * * * for services rendered’’

within the meaning of section 

1221(a)(4). 

Written comments were received from 

interested parties, and public hearings 

to discuss these regulations were held 

on November 7, 2006, and August 22, 

2007. Most of the comments focused on 

the decisions in Burbank Liquidating 

Corp. v. Commissioner, 39 T.C. 999 

(1963), acq. sub nom. United Assocs., 

Inc., 1965–1 C.B. 3, aff’d in part and 

rev’d in part on other grounds, 335 F.2d 

125 (9th Cir. 1964) and Federal National 

Mortgage Association v. Commissioner, 

100 T.C. 541 (1993). The Treasury 

Department and the IRS considered the 

comments and have decided to 

withdraw the proposed regulations. 

The IRS will not challenge return 

reporting positions of taxpayers under 

section 1221(a)(4) that apply existing 

law, including Burbank Liquidating; 

Federal National Mortgage Association; 

and Bieldfeldt v. Commissioner, 231 

F.3d 1035 (7th Cir. 2000), cert. denied, 

534 U.S. 813 (2001). See also Rev. Rul. 

80–56 (1980–1 C.B. 154) and Rev. Rul. 

80–57 (1980–1 C.B. 157). The IRS and 

the Treasury Department will continue 

to study this area and may issue 

guidance in the future. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirement. 

Withdrawal of Notice of Proposed 

Rulemaking 

Accordingly, under the authority of 

26 U.S.C. 7805, the notice of proposed 

rulemaking (REG–109367–06) published 

in the Federal Register on August 7, 

2006 (71 FR 44600) is withdrawn. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E8–8817 Filed 4–22–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Office of International Investment 

31 CFR Part 800 

RIN 1505–AB88 

Regulations Pertaining to Mergers, 

Acquisitions, and Takeovers by 

Foreign Persons 

AGENCY: Department of the Treasury. 

ACTION: Proposed Rule; Notice of 

Inquiry and Public Meeting. 

SUMMARY: This proposed regulation 

amends regulations in part 800 of 31 

CFR that implement section 721 of the 

Defense Production Act of 1950, as 

amended. The proposed regulations 

would implement amendments made by 

the Foreign Investment and National 

Security Act of 2007 to section 721 of 

the Defense Production Act of 1950 

(‘‘section 721’’). While the proposed 

regulations retain many features of the 

existing regulations, a number of 

changes have been made to increase 

clarity, reflect developments in business 

practices over the past several years, 

and make additional improvements 

based on experiences with the existing 

regulations. 

DATES: Comment Date: Written 

comments must be received by June 9, 

2008. 

Public Meeting Date: The public 

meeting will be held from 10 a.m. until 

12 p.m. on May 2, 2008. 

ADDRESSES: Comments: Written 

comments on the proposed regulations 

may be submitted electronically via the 

federal government E-Rulemaking 

Portal: www.regulations.gov. Written 

comments may be submitted by mail to: 

Nova Daly, Deputy Assistant Secretary, 

U.S. Department of the Treasury, 1500 

Pennsylvania Avenue, NW., 

Washington, DC 20220. All comments 

and attachments submitted are part of 

the public record and subject to 

disclosure. Do not include any material 

in your comments that you consider to 

be confidential or inappropriate for 

public disclosure. 

You may view copies of this proposed 

rule and any comments we receive 

about this proposal at 

www.regulations.gov. You may 

personally inspect and photocopy 

comments at the Department of the 

Treasury Library, Room 1428, Main 

Treasury Building, 1500 Pennsylvania 

Avenue, NW., Washington, DC. You can 

make an appointment to inspect 

comments by calling (202) 622–0990. 

A link to written comments will be 

established on the following Web site: 

http://www.treas.gov/offices/ 

international-affairs/cfius/index.shtml. 

Public Meeting Address: The public 

meeting will be held in the Cash Room 

of the Treasury Building, at 1500 

Pennsylvania Avenue, NW., 

Washington, DC 20220. 

FOR FURTHER INFORMATION CONTACT: For 

questions about this Proposed Rule or 

the Notice of Inquiry and Public 

Meeting, contact: Nova Daly, Deputy 

Assistant Secretary, U.S. Department of 

the Treasury, 1500 Pennsylvania 

Avenue, NW., Washington, DC 20220; 

telephone: (202) 622–2752; or e-mail: 

Nova.Daly@do.treas.gov., or Welby 

Leaman, Senior Advisor; telephone: 

(202) 622–0099; or e-mail: 

Welby.Leaman@do.treas.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background With Regard to the 

Notice of Inquiry and Public Meeting 

The President has directed the 

Secretary of the Treasury to issue 

regulations implementing section 721 of 

the Defense Production Act of 1950, as 

amended. On October 24, 2007, the 

Department of the Treasury convened a 

public meeting at the Department of the 

Treasury to solicit a wide array of views 

on several broad topics, including from 

businesses and professionals active in 

international mergers and acquisitions, 

in order to inform regulatory 

development. The purpose of this 

second notice of inquiry and public 

meeting is to continue to seek public 

input on these important matters, 

mstockstill on PROD1PC66 with PROPOSALS

21862 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

particularly in light of the publication of 

the proposed regulations. 

Treasury announces a public meeting 

to be held from ten until twelve o’clock 

(10 a.m.–12 p.m.) on May 2, 2008, in the 

Cash Room of the Treasury Building, at 

1500 Pennsylvania Avenue, NW., 

Washington, DC 20220, to discuss issues 

associated with these proposed 

regulations. The meeting will be open to 

the public on a first-come, first-served 

basis. Space is limited. Due to security 

requirements and to facilitate entry to 

the meeting site, anyone wishing to 

attend must contact Ms. Barbara Vaughn 

at Barbara.Vaughn@do.treas.gov or 

(202) 622–1935 no later than April 25, 

2008, in order to provide the necessary 

clearance information: Full name, 

business affiliation, date of birth, and 

Social Security number. For foreign 

nationals: Full name, business 

affiliation, date of birth, passport 

number, and the country where the 

passport was issued. When arriving for 

the meeting, attendees must present 

photo or passport identification and/or 

a U.S. Government building pass, if 

applicable, and should arrive at least 

one-half hour prior to the start time of 

the meeting. The public meeting is 

physically accessible to people with 

disabilities. Individuals requiring 

special services, such as sign language 

interpretation, are asked to indicate this 

to Ms. Vaughn. 

II. Background 

The Statute 

The Foreign Investment and National 

Security Act of 2007, Public Law 110–

49, 121 Stat. 246 (‘‘FINSA’’), which 

amends section 721 of the Defense 

Production Act of 1950 (50 U.S.C. App. 

§ 2170 et seq.) (‘‘DPA’’), requires the 

issuance of regulations implementing its 

provisions, following public notice and 

comment. 

FINSA was passed by Congress as 

H.R. 556, which adopted the language of 

S. 1610. S. Rep. 110–80, accompanying 

S. 1610, provides a useful history of the 

various bills leading to the enactment of 

FINSA. President Bush signed FINSA 

into law on July 26, 2007, and it became 

effective on October 24, 2007. 

Section 721 authorizes the President 

to review mergers, acquisitions, and 

takeovers by or with any foreign person 

which could result in foreign control of 

any person engaged in interstate 

commerce in the United States, to 

determine the effects of such 

transactions on the national security of 

the United States. FINSA codifies 

aspects of the structure, role, process, 

and responsibilities of the Committee on 

Foreign Investment in the United States 

(‘‘CFIUS’’) and the role of executive 

branch departments, agencies, and 

offices in CFIUS’s review of transactions 

for national security concerns. A brief 

summary of major aspects of the statute 

follows. 

FINSA formally establishes CFIUS in 

statute, as CFIUS had existed only by 

executive order. FINSA specifies the 

following as members of CFIUS: The 

Secretary of the Treasury (who serves as 

chairperson), the Attorney General, and 

the Secretaries of Homeland Security, 

Commerce, Defense, State, and Energy. 

FINSA also provides that CFIUS may 

include, generally or on a case-by-case 

basis as the President deems 

appropriate, the heads of any other 

executive department, agency, or office. 

The President has designated additional 

members of CFIUS in Executive Order 

11858, as amended by Executive Order 

13456 on January 23, 2008. FINSA also 

establishes the Director of National 

Intelligence (‘‘DNI’’) and the Secretary 

of Labor as ex officio members of CFIUS. 

FINSA specifies that the DNI is to 

provide independent analyses of any 

national security threats posed by 

transactions, and is to have no other 

policy role. FINSA requires that the role 

of the Secretary of Labor, with respect 

to mitigation agreements, be defined by 

regulations. FINSA further anticipates 

that, for each transaction before CFIUS, 

the Department of the Treasury shall 

designate, as appropriate, one or more 

lead agencies. The lead agency, on 

behalf of CFIUS, may negotiate, enter 

into or impose, and enforce mitigation 

agreements or conditions with parties to 

the transaction to address any threats to 

national security posed by the 

transaction. 

FINSA also formalizes the process by 

which CFIUS conducts national security 

reviews of any transaction that could 

result in foreign control of a person 

engaged in interstate commerce in the 

United States, which FINSA refers to as 

a ‘‘covered transaction.’’ Specifically, 

FINSA provides for a 30-day CFIUS 

review of covered transactions to 

determine the effect of the transactions 

on national security, and address any 

threat. Subject to certain exceptions 

(discussed below), FINSA requires an 

additional 45-day investigation in the 

following types of cases: (1) Where the 

transaction threatens to impair U.S. 

national security and that threat has not 

been mitigated prior to or during the 30- 

day review; (2) where the transaction is 

a foreign government-controlled 

transaction; (3) transactions that would 

result in foreign control over critical 

infrastructure and that CFIUS 

determines could impair national 

security, if that impairment has not been 

mitigated; or (4) where the lead agency 

recommends, and CFIUS concurs, that 

an investigation be undertaken. 

To ensure high-level accountability 

for CFIUS decisions, FINSA requires 

that a high-level official of the 

Department of the Treasury and at the 

lead agency certify to Congress that, for 

any covered transaction on which 

CFIUS has concluded action under 

section 721, CFIUS has determined that 

there are no unresolved national 

security concerns. The certification 

must be made at the Assistant Secretary 

level or above for transactions on which 

CFIUS concludes action under section 

721 after a review, and at the Deputy 

Secretary level or above for transactions 

on which CFIUS concludes action under 

section 721 after an investigation. If it is 

the President who concludes action on 

a transaction under section 721, then he 

must announce his decision publicly. 

In addition, in order for CFIUS to 

conclude action under section 721 for a 

foreign government-controlled 

transaction without proceeding beyond 

a review to an investigation, the 

Department of the Treasury and the lead 

agency must determine, at the Deputy 

Secretary level or above, that the 

transaction will not impair national 

security. Similarly, under sections 

721(b)(2)(B)(i)(III) and 721(b)(2)(D)(i), in 

cases where the transaction would 

result in foreign control over critical 

infrastructure that could impair national 

security, and such impairment has not 

been mitigated during the review 

period, CFIUS may conclude action 

under section 721 without proceeding 

beyond a review if the Department of 

the Treasury and the lead agency 

determine, at the Deputy Secretary level 

or above, that the transaction will not 

impair national security. 

Where a covered transaction does 

present national security concerns, 

FINSA provides statutory authority for 

CFIUS, or a lead agency acting on behalf 

of CFIUS, to enter into mitigation 

agreements with parties to the 

transaction or impose conditions on the 

transaction to address such concerns. 

This authority enables CFIUS to 

mitigate any national security risk posed 

by a transaction, rather than 

recommending to the President that the 

transaction be prohibited because it 

could impair U.S. national security. 

FINSA provides that CFIUS may 

reopen its review of a transaction on 

which it previously concluded action 

under section 721 if a party to the 

transaction submitted false or 

misleading material information or 

omitted material information. CFIUS 

may also reopen a review where a party 

to a transaction intentionally and 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21863 

materially breaches a mitigation 

agreement or condition, and there are no 

other remedies available to address the 

breach. Any decision by CFIUS to 

reopen a review must be made at the 

Under Secretary level or above. FINSA 

also provides CFIUS with authority to 

impose civil penalties for violations of 

section 721, including violations of any 

mitigation agreement. Finally, FINSA 

increases CFIUS’s reporting to Congress 

concerning the work it has undertaken 

pursuant to section 721. In addition to 

the certifications described previously, 

which CFIUS must provide to Congress 

after concluding action on a transaction 

under section 721, CFIUS must also 

provide annual reports on its work, 

including a list of the transactions it has 

reviewed or investigated in the 

preceding 12 months, analysis related to 

foreign direct investment and critical 

technologies, and a report on foreign 

direct investment from certain 

countries. 

III. Discussion of Proposed Regulations 

Overview 

The proposed CFIUS regulations 

retain many of the basic features of the 

existing regulations, which were 

adopted after the 1988 enactment of the 

Exon-Florio provision of the DPA. The 

system continues to be based on 

voluntary notices to CFIUS by parties to 

transactions, although CFIUS retains the 

authority to review a transaction of 

which it has not been voluntarily 

notified. The principal new 

development with regard to the 

procedures for filing notice to CFIUS is 

that the proposed regulations make 

explicit CFIUS’s current practice of 

encouraging parties to contact and 

engage with CFIUS before formally 

filing. By consulting with the Staff 

Chairperson in advance of filing and, 

where appropriate, providing CFIUS 

with a draft notice or some portion of 

the information that may later be 

included in the notice, parties can help 

ensure that their notice, once submitted, 

will provide the information CFIUS 

needs to do its work. Such pre-notice 

consultations can help ensure that 

reviews of covered transactions are 

concluded as efficiently as possible. In 

addition to these regulations, the 

Committee is preparing guidance on 

certain transactions, pursuant to section 

721(b)(2)(E). The guidance is to include 

a discussion of, among other things, 

certain types of information the 

Committee considers useful for 

companies filing a notice to provide, 

based on past experience. 

The provisions of Subpart D 

pertaining to the contents of a voluntary 

notice have been expanded to reflect 

questions that CFIUS now routinely 

asks of notifying parties. By laying out 

these questions in the regulations, and 

having the relevant information 

included in each notification, CFIUS 

will be better prepared to conduct an 

efficient and in-depth analysis as soon 

as a notice is accepted. As noted in the 

proposed regulations, personal 

identifier information, which is needed 

to examine the backgrounds of members 

of the boards of directors and senior 

company officials of entities in the 

ownership chain of the foreign acquirer, 

should be submitted in conjunction 

with each notification, and should be 

marked clearly and provided as a 

separate document to ensure that 

distribution of the personal identifier 

information is as limited as possible, as 

well as to facilitate deletion of this 

information from CFIUS’s records once 

action under section 721 is concluded. 

In addition to the new information 

requirements, the proposed regulations, 

consistent with FINSA, also require 

each of the parties to a notified 

transaction to provide certifications 

regarding the accuracy and 

completeness of their notices, with 

regard to information about the party 

making the certification (including 

certain affiliated entities), the 

transaction, and all follow-up 

information. A notice will not be 

deemed complete if it lacks 

certifications that comply with these 

requirements, and CFIUS may reject a 

notice that has previously been accepted 

if the final certification required under 

section 800.701(d) has not been 

received. Furthermore, material 

misstatements or omissions made by a 

party in connection with a section 721 

review or investigation may result in the 

rejection of the notice, or the reopening 

of a completed review or investigation. 

Consistent with the new authority 

provided by FINSA, the proposed 

regulations provide for penalties for 

breach of section 721 or of mitigation 

agreements or conditions. The proposed 

regulations also provide that a 

mitigation agreement may include 

provisions establishing liquidated 

damages for violations of the agreement. 

(See § 800.801.) Parties that receive a 

notice of the imposition of penalties 

will have the opportunity to appeal the 

imposition of the penalties to CFIUS. 

Certain changes to the existing 

regulations have been made, including 

revisions to or deletions of existing 

examples or provisions, to take into 

account FINSA and other applicable 

law. 

Covered Transaction 

FINSA introduced the term ‘‘covered 

transaction’’ to identify the types of 

transactions that are subject to review 

and investigation by CFIUS. The 

statutory definition of covered 

transaction maintains the scope of 

section 721 as pertaining to any merger, 

acquisition, or takeover by or with a 

foreign person which could result in 

foreign control of any person engaged in 

interstate commerce in the United 

States. 

These proposed regulations further 

clarify the meaning of the term ‘‘covered 

transaction’’ (see § 800.206) by 

specifying the scope of important 

elements of the term, including 

‘‘transaction,’’ ‘‘control,’’ ‘‘U.S. 

business,’’ and ‘‘foreign person.’’ The 

definitions and clarification of these 

terms appear in Subpart B (Definitions) 

and in Subpart C (Coverage). 

Transaction 

The term ‘‘transaction’’ is defined in 

section 800.224, and implements the 

statutory requirement that a covered 

transaction be one that involves a 

‘‘merger, acquisition, or takeover’’ that 

is proposed or consummated. This 

definition continues to exclude 

greenfield investment, and includes 

only a very limited type of long-term 

lease. 

Control 

FINSA does not define ‘‘control,’’ but 

rather requires that CFIUS prescribe a 

definition by regulation. (See FINSA, 

Pub. L. 110–49, section 2, adding 

§ 721(a)(2).) ‘‘Control’’ is and always has 

been a key threshold concept in section 

721, as the authority provided under 

that section, from the authority to 

review or investigate a notified 

transaction to the authority of the 

President to take action to suspend or 

prohibit a transaction, is predicated on 

the existence of foreign control of a 

person engaged in interstate commerce 

in the United States. This focus on 

control suggests a fundamental 

congressional judgment that national 

security risks are potentially highest in 

transactions that entail the acquisition 

of control of an entity operating in the 

United States. Indeed, Congress made 

clear in the 1988 Conference Report that 

accompanied the original Exon-Florio 

provision that ‘‘the Conferees in no way 

intend to impose barriers to foreign 

investment. Section 721 is not intended 

to authorize investigations on 

investments that could not result in 

foreign control of persons engaged in 

interstate commerce.’’ (See H.R. Rep. 

No. 100–576 at 926.) Nothing in FINSA 

mstockstill on PROD1PC66 with PROPOSALS

21864 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

or its legislative history suggests any 

departure from this focus on control. 

Indeed, FINSA introduces the new term 

‘‘covered transaction,’’ which, as 

discussed above, incorporates the 

concept of control in its definition. 

The proposed regulations adopt the 

long-standing approach of defining 

‘‘control’’ in functional terms as the 

ability to exercise certain powers over 

important matters affecting a business. 

Specifically, ‘‘control’’ is defined as the 

‘‘power, direct or indirect, whether or 

not exercised, through the ownership of 

a majority or a dominant minority of the 

total outstanding voting interest in an 

entity, board representation, proxy 

voting, a special share, contractual 

arrangements, formal or informal 

arrangements to act in concert, or other 

means, to determine, direct, or decide 

important matters affecting an entity; in 

particular, but without limitation, to 

determine, direct, take, reach, or cause 

decisions regarding * * * important 

matters affecting an entity[.]’’ (See 

§§800.203(a).) Two points should be 

emphasized concerning this definition. 

First, it eschews bright lines. Consistent 

with the existing regulations, control is 

not defined in terms of a specified 

percentage of shares or numbers of 

board seats. Although share holding and 

board seats are relevant to a control 

analysis, neither factor on its own is 

necessarily determinative. Instead, all 

relevant factors are considered together 

in light of their potential impact on a 

foreign person’s ability to determine 

direct, or decide important matters 

affecting a company. Second, echoing 

the congressional views expressed in 

the conference report accompanying the 

original legislation in 1988, the focus of 

the statute and therefore these 

regulations is control. Even 

acknowledging the considerable 

flexibility necessarily inherent in a 

national security regulation, the 

statutory standard is not satisfied by 

anything less than control. Acquisition 

of influence falling short of the 

definition of control over a U.S. 

business is not sufficient to bring a 

transaction under section 721. 

In light of the significance of the 

concept of control to this regulatory 

framework, control appears in several 

different places throughout the 

regulations, both in those regulations 

that define the nature of the acquirer 

and those that define the transaction 

itself. For example, control is a key 

concept in the definitions of ‘‘foreign 

person’’ and ‘‘foreign governmentcontrolled transaction.’’ (See §§ 800.216 

and 800.214, respectively.) A foreign 

person is any foreign national (i.e., a 

natural person who is a citizen of 

another country), foreign government, or 

foreign entity, or any ‘‘entity over which 

control is exercised or exercisable by a 

foreign national, foreign government or 

foreign entity.’’ A foreign governmentcontrolled transaction is one that ‘‘could 

result in the control of a U.S. business 

by a foreign government or a person 

controlled by or acting on behalf of a 

foreign government.’’ Similarly, 

‘‘covered transaction’’ is defined in 

these proposed regulations as ‘‘any 

transaction that is proposed or pending 

after the effective date [i.e., August 23, 

1988] by or with any foreign person, 

which could result in control of any 

person engaged in interstate commerce 

in the United States.’’

Conversely, transactions that will not 

result in foreign control over a person 

engaged in interstate commerce in the 

United States are not subject to section 

721. Thus, a start-up or ‘‘greenfield’’

investment is not subject to section 721. 

(See § 800.301(c), example 3.) Moreover, 

as noted below, a foreign person does 

not control an entity if it holds 10 

percent or less of the voting interest in 

the entity and it holds that interest 

‘‘solely for the purpose of investment,’’

as that term is defined in § 800.223. (See 

§ 800.302(c).) This rule would not apply 

if only the first prong is satisfied. For 

example, a transaction involving a 

foreign person with an interest of nine 

percent in a U.S. business who has 

bargained for rights to determine, direct, 

take, reach, or cause decisions regarding 

important matters affecting that 

business, would be a covered 

transaction. Thus, the regulations do not 

provide, and never have provided, an 

exemption based solely on whether an 

investment is 10 percent or less in a 

U.S. business. 

Section 800.203 lays out the basic 

definition of ‘‘control,’’ provides an 

exemplary list of matters that are 

deemed to be important, states that 

CFIUS will consider certain 

relationships between persons in 

evaluating whether an entity is 

considered to be controlled by a foreign 

person, and identifies minority 

shareholder protections that are not 

considered in themselves to confer 

control over an entity. The regulations 

add a number of examples to provide 

greater clarity on the application of this 

definition. 

U.S. Business 

Section 800.227 defines ‘‘U.S. 

business,’’ which is included in the 

definition of ‘‘covered transaction,’’ to 

mean any entity engaged in interstate 

commerce in the United States, but only 

to the extent of its activities in interstate 

commerce in the United States. In 

determining whether a person is a U.S. 

business, CFIUS will consider whether 

the entity (which is defined to include 

any branch, partnership, group or subgroup, association, estate, trust, 

corporation or division of a corporation, 

organization, assets operated by any one 

of the foregoing as a business 

undertaking in a particular location or 

for particular products or services, even 

though those assets may not be 

organized as a separate legal entity, or 

government) that is the subject of the 

acquisition is engaged in interstate 

commerce. 

Foreign Person 

The term ‘‘foreign person’’ is defined 

in section 800.216. The only significant 

revision that the proposed regulations 

make to the definition of foreign person 

is to introduce the new concept of a 

‘‘foreign entity,’’ further discussed in 

the section-by-section analysis below 

(see § 800.212), and to specify that an 

entity that qualifies as a foreign entity 

will be deemed a foreign person. 

Transactions That Are and Are Not 

Covered Transactions 

Sections 800.301 and 800.302 

illustrate the types of transactions that 

are and are not covered transactions, 

respectively. Section 800.301(a) further 

develops the reference in section 

800.203 to ‘‘exercisable’’ power by 

making clear that, if a foreign person has 

the ability to exercise control over a U.S. 

business at the time a transaction is 

consummated, at will, or after a 

particular period of time, then the 

person cannot avoid a determination 

that ‘‘control’’ exists for purposes of 

section 721 by voluntarily forbearing 

from, or delaying, the exercise of 

control. 

Section 800.302(c) provides a special, 

but very limited, qualification to the 

application of the general control 

principle. Pursuant to section 

800.302(c), a foreign person does not 

control an entity if it satisfies a twopronged test: (1) It holds 10 percent or 

less of the voting interest in the entity, 

and (2) its interest is held solely for the 

purpose of investment. Section 800.223 

lays out the test for whether an interest 

is held solely for the purpose of 

investment. Under that test, an interest 

would not be held solely for the purpose 

of investment if the foreign person has 

the capability and an intention to 

control the entity, possesses or develops 

any purpose other than investment, or 

acts in a way that is inconsistent with 

an intent to hold the interest solely for 

the purpose of investment. This special 

rule applies to all types of investors 

equally, rather than assuming that 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21865 

certain types of institutions are passive 

investors. 

Sections 800.301(b) and 800.302(d) 

further illustrate the extent to which 

greenfield investments, the acquisition 

of branch offices, assets from multiple 

sources, and defunct businesses, and the 

entry into commodity purchase 

contracts, service contracts, and 

technology license agreements, are 

covered transactions. Section 800.301(d) 

addresses joint ventures, which may be 

covered only if they involve the 

contribution of a U.S. business. 

Sections 800.302(e), (f), and (g) and 

800.303 establish special rules with 

regard to securities underwriting, 

insurance, and lending, to clarify certain 

circumstances in which a foreign person 

may, in the ordinary course of its 

business, obtain an interest in an entity 

that may not be considered control of 

that entity because of those 

circumstances. 

Section-by-Section Discussion of 

Proposed Changes 

Section 800.201. The term 

certification has been added as part of 

the implementation of a provision in 

FINSA stating that parties that file 

voluntary notices must certify the 

accuracy and completeness of their 

filings with CFIUS. This new 

requirement applies both to notices and 

to any follow-up information provided 

to CFIUS. The Staff Chairperson may 

reject at any time during a review or 

investigation a voluntary notice that 

does not include certifications that 

comply with the requirements of these 

regulations. An inaccurate or 

incomplete certification may give rise, 

in certain circumstances, to the 

imposition of penalties under section 

800.801(a) and other applicable laws. 

Section 800.203. The definition of 

control has been clarified and refined to 

remove unnecessary wording, but is 

substantively similar to the prior 

definition. The remaining changes are 

generally intended to clarify that control 

can be exercised in a number of ways, 

both affirmatively and, in some cases, 

negatively. At the same time, the 

definition recognizes that certain types 

of negative rights that are intended only 

to protect the investment-backed 

expectations of minority shareholders, 

and that do not affect strategic decisions 

on business policy or day-to-day 

management of an entity or other 

important matters affecting the entity, 

do not constitute control. The focus of 

CFIUS’s analysis of whether a particular 

transaction could result in the 

acquisition of foreign control is on the 

ability of a foreign person to determine, 

direct, or decide important matters 

affecting a U.S. business, including to 

determine, direct, take, reach, or cause 

decisions regarding important matters 

affecting the U.S. business. Numerous 

examples have been added to illustrate 

the operation of these principles. 

Section 800.207. In defining critical 

infrastructure, the proposed regulations 

state that a transaction involves critical 

infrastructure where the incapacity or 

destruction of the particular assets at 

issue in the particular transaction under 

review would have a debilitating impact 

on national security. 

Section 800.208. FINSA requires that 

regulations implementing section 721 

include a definition of critical 

technologies. The proposed regulations 

define critical technologies with 

reference to existing regulatory regimes 

that deal with the trade or handling of 

sensitive goods, technology, and 

services. Section 800.402(c)(4) requires 

voluntary notices to identify, among 

other things, any critical technologies 

produced or traded by the U.S. business 

that is the subject of the covered 

transaction. 

Section 800.209. This section defines 

duly authorized designee, which the 

definition of certification in section 

800.201 uses to identify additional 

persons besides the chief executive 

officer who may complete the 

certifications required by the 

regulations. This definition makes clear 

that certifications must come from 

specified knowledgeable, high-level 

individuals who have the authority to 

bind an organization. CFIUS will not 

accept a certification signed only by 

outside counsel. 

Section 800.211. The term entity 

encompasses the range of persons, other 

than natural persons, that can comprise 

a ‘‘person’’ for purposes of section 721. 

An entity need not have a distinct legal 

personality, as the term includes 

branches, partnerships, groups or subgroups, associations, estates, trusts, 

corporations or divisions of 

corporations, organizations, 

governments, or assets operated by any 

one of the foregoing as a business 

undertaking in a particular location or 

for particular products or services, 

regardless of whether they are organized 

as a legal matter. Accordingly, an 

operating unit or sub-unit of a 

business—particularly one that includes 

the business’ production facilities, 

customer or vendor relationships, 

technology, staff, know-how or other 

tangible or intangible assets—may be an 

entity, even if that operating unit or subunit is not legally organized. 

Section 800.212. A new term, foreign 

entity, has been added to refer to entities 

organized outside the United States that 

CFIUS considers to be foreign persons 

because of their substantial foreign 

ownership, even though ownership is 

widely dispersed among different 

foreign persons and no single foreign 

person may control the entity. 

Section 800.216. The definition of 

foreign person has been expanded to 

include ‘‘foreign entity.’’ In addition, a 

number of examples have been added to 

provide further guidance. 

Section 800.218. The definition of 

lead agency specifies, pursuant to 

FINSA and Executive Order 11858, as 

amended by Executive Order 13456, 

that the Department of the Treasury may 

designate an agency as being 

responsible for all or any portion of a 

matter under section 721, including the 

review, investigation, and negotiation or 

monitoring of mitigation agreements 

and conditions. The Department of the 

Treasury may appoint more than one 

lead agency for a single transaction. 

Section 800.219. The definition of the 

term parent includes immediate, 

intermediate, and ultimate parents of an 

entity. 

Section 800.224. The term transaction 

replaces the term acquisition in order to 

harmonize the terminology of the 

regulations with that of the statute. In 

addition to general clarifications to the 

definition, the proposed regulations add 

certain joint ventures and long-term 

leases as types of transactions. The 

current regulations already provide that 

joint ventures involving the 

contribution of a U.S. person could be 

covered transactions, though joint 

ventures are not actually listed in the 

definition of acquisition. Long-term 

leases are covered when, because of the 

terms of the lease and the extent of the 

lessee’s authority over the U.S. business, 

the lease is effectively a transaction for 

purposes of section 721. A ‘‘transaction’’

is only a ‘‘covered transaction’’ if the 

other elements of the definition of 

‘‘covered transaction’’ are also present. 

Section 800.227. The term U.S. 

business replaces and expands upon the 

term United States person, in the 

manner and for the reasons described 

above. 

Section 800.301. This section is 

revised to further clarify the types of 

transactions that are covered 

transactions under section 721. The 

principal substantive change in this 

section relates to joint ventures. The 

proposed regulations revise section 

800.301(d) to harmonize the control 

standard for joint ventures with the 

standard used for all other transactions. 

If the joint venture would result in 

‘‘control’’ of a U.S. business by a foreign 

person under the definition of ‘‘control’’

mstockstill on PROD1PC66 with PROPOSALS

21866 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

in section 800.203, then the joint 

venture is a covered transaction. 

Section 800.302. Paragraph (b) 

clarifies factors that CFIUS will take 

into account in determining whether the 

acquisition of convertible instruments, 

rather than the conversion of such 

instruments, would be the transaction 

that is potentially a covered transaction. 

The time at which control is conferred, 

whether at acquisition or conversion, 

will depend, among certain other 

factors, on the extent to which the 

acquirer can control the timing of the 

conversion. In either case, control will 

depend on what rights the convertible 

interests, once converted, will convey to 

their holder. 

Paragraph (c) has been revised and an 

example added to clarify that the 10 

percent threshold is determinative only 

if the foreign person’s acquisition is 

solely for the purpose of investment, as 

that term is defined in section 800.223. 

If the acquisition is not solely for the 

purpose of investment—which may be 

reflected by the foreign person’s actions, 

its negotiation of special rights, or other 

factors—then the rule that an ownership 

interest of 10 percent or less does not 

confer control does not apply. 

Paragraph (d) combines two previous 

provisions that addressed the ‘‘U.S. 

business’’ element of the ‘‘covered 

transaction’’ definition. In particular, 

this paragraph elaborates upon the 

provision in the ‘‘entity’’ definition that 

an entity, and therefore a U.S. business, 

may involve the acquisition of assets of 

an entity, provided that those assets are 

bound together in a sufficiently 

cohesive relationship such that they 

themselves could be readily operated as 

a separate, stand-alone business. 

Section 800.401. The procedures for 

voluntary notice have been expanded to 

make explicit the opportunity for 

interaction between CFIUS and the 

parties to a transaction before a notice 

is formally filed. After two decades of 

experience implementing section 721, 

CFIUS believes that the review process 

is most effective and efficient when a 

notice provides CFIUS with full 

information regarding a transaction, 

rather than requiring CFIUS to ask for 

additional information after the notice is 

filed. This experience is the reason for 

the additions to this section and section 

800.402, which lays out the required 

contents of voluntary notice. In 

particular, with regard to the procedures 

for notice, CFIUS encourages parties to 

consult with CFIUS prior to filing a 

notice. Information provided to CFIUS 

as part of a pre-notice consultation 

becomes part of the formal notice and is 

accorded the confidentiality protections 

of section 721(c). This gives CFIUS an 

opportunity to understand the 

transaction, and to suggest information 

that the parties should include in their 

notice, thereby helping CFIUS resolve 

any national security issues as 

efficiently as possible. These new 

provisions also make clear the 

circumstances under which CFIUS may 

contact parties that have not yet filed a 

notice, and request that they provide 

information to help CFIUS determine 

whether a filing may be appropriate. 

Section 800.402. This section, which 

describes the information that must be 

included in a voluntary notice to CFIUS, 

is expanded to require additional data 

that CFIUS routinely has requested of 

parties. Information submitted to CFIUS 

in connection with a voluntary notice is 

entitled to confidentiality under section 

800.702, and is exempt from disclosure 

under 5 U.S.C. 552. 

Paragraph (a) has been revised to 

make clear that a voluntary notice will 

not be considered complete if any 

required information is missing. 

However, in the case of a hostile 

takeover where a voluntary notice is 

filed by fewer than all of the parties to 

a transaction, paragraph (b) provides 

that CFIUS may accept an otherwise 

complete notice that does not provide 

complete information on each nonnotifying party, so long as it provides 

the portion of that information that is 

known or reasonably available to the 

notifying parties. (See also § 800.403(b), 

providing that the Staff Chairperson 

may require the parties to provide 

certain information pertaining to the 

transaction within seven days of the 

Staff Chairperson’s request for such 

information.) 

Paragraph (c) specifies the details 

relating to the transaction that must be 

described in a voluntary notice. While 

the regulations previously required 

parties to submit many of these details 

in voluntary notices, some specified in 

paragraph (c) are newly required. These 

include, for example, additional 

information regarding ultimate and 

intermediate parents of the foreign 

person making the acquisition; 

transaction value information; 

identification of other persons with a 

role in the transactions; additional 

information regarding contracts with 

and goods supplied directly or 

indirectly to the government; additional 

product information; identification of 

any special government rights over the 

foreign person making the acquisition; 

description of any agreements among 

foreign persons to act in concert with 

respect to parties to the transaction; and 

personal identifier information for 

certain key personnel. Subparagraph 

(c)(ii) requires that the notice include 

certain export-control related 

information, including the identification 

of emergent technologies that may be 

designated or determined to be covered 

by the United States Munitions List, 

which is set forth in the International 

Traffic in Arms Regulations (22 CFR 

parts 120 through 130), and therefore be 

critical technologies, as defined in 

section 800.208(a). 

Other paragraphs in this section 

contain new informational requirements 

for parties filing voluntary notices. 

These include paragraph (j), which 

requires an organization chart showing 

the relationship between the foreign 

person making the acquisition and its 

parents, affiliates, and subsidiaries; and 

paragraph (k), which requires the parties 

to indicate whether either party has 

been involved previously in a 

transaction notified to CFIUS, and 

whether either party is a party to a 

mitigation agreement entered into under 

section 721. Paragraph (j) also requires 

the parties to provide a full statement of 

their view as to whether (1) the acquirer 

is controlled by a foreign government, 

(2) the acquirer is a foreign person, and 

(3) the transaction will result in foreign 

control of a U.S. person. 

Paragraph (i), which requires the 

provision of the purchase agreement or 

other similar documents establishing 

the terms of the agreement, has been 

revised to reflect that such documents 

must reflect terms as to which there is 

an actual agreement between the parties, 

particularly with respect to matters 

relating to post-closing control and 

governance. CFIUS reserves the right to 

reject a voluntary notice in cases in 

which the deal terms regarding such 

matters are undecided. 

Section 800.403. It is CFIUS’s 

expectation that, in light of the added 

questions pertaining to the contents of 

voluntary notice (see § 800.402), the 

need to request follow-up information 

from the parties will be reduced. 

However, in cases where CFIUS 

requests follow-up information, such 

information must be provided promptly. 

This section makes clear that a party’s 

failure to provide promptly any followup information requested by CFIUS is 

grounds for rejecting the notice. If such 

information cannot be provided within 

two business days of CFIUS’s request, 

the parties should request an extension 

of time in writing. 

Section 800.501. A new paragraph (c) 

has been added to this section to clarify 

the Chairperson’s role in overseeing the 

secretariat function for CFIUS. Parties 

contemplating filing notices or that have 

filed notices should therefore work with 

the Staff Chairperson, who may arrange 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21867 

contacts or meetings with other member 

agencies as appropriate. 

Section 800.502. Provisions on 

commencing review (which were 

previously in section 800.404 of subpart 

D) have been consolidated with 

provisions regarding the beginning of 

the 30-day review period in section 

800.502. The proposed regulations also 

provide that the 30-day review period 

will commence on the next business day 

after the Staff Chairperson has 

determined that the notice is complete 

and has disseminated the notice to all 

CIFUS members, which the Staff 

Chairperson is required to do promptly. 

Section 800.503. This section now 

specifies the triggers for commencing an 

investigation, which are drawn from 

FINSA and Executive Order 11858, as 

amended. 

Section 800.506. Executive Order 

11858, as amended, specifies the 

circumstances under which CFIUS will 

forward a transaction to the President 

for a final decision. This section repeats 

these requirements. In all other cases, 

where CFIUS concludes deliberative 

action without referring the matter to 

the President, the Department of the 

Treasury will send written advice to the 

parties of the determination to conclude 

action under section 721. When the 

President makes the final decision on a 

transaction, FINSA requires that that 

decision be announced publicly. 

Section 800.507. As under the prior 

regulations, parties may request that 

their notices be withdrawn from CFIUS 

consideration at any time prior to the 

conclusion of all deliberative action 

under section 721. However, section 

800.507 incorporates the new 

procedures that FINSA requires CFIUS 

to follow with regard to withdrawn 

transactions, including tracking of 

withdrawn transactions and the 

establishment of interim protections, as 

appropriate, to address national security 

concerns. 

Section 800.508. FINSA requires that 

the regulations provide for an 

appropriate role for the Secretary of 

Labor with respect to mitigation 

agreements. Under the proposed 

regulations, the Secretary of Labor will 

identify for CFIUS any risk mitigation 

provisions proposed to or by CFIUS that 

would violate U.S. labor laws. 

Section 800.601. This section has 

been substantially shortened to delete 

provisions pertaining to the President’s 

authority that are not necessary to 

include in regulation because they are 

already addressed in FINSA. 

Section 800.701. FINSA includes an 

important provision that requires each 

notifying party to certify in writing that 

the information it provides to CFIUS is 

complete and accurate as it relates to 

itself and the transaction. This 

requirement pertains both to the 

information in the voluntary notice (see 

§ 800.402(k)) and to follow-up 

information. CFIUS may consider a 

party’s failure to provide a certification 

with regard to follow-up information to 

be a material omission. (See 

§ 800.601(e).) 

Section 800.702. The confidentiality 

protections have been clarified to 

emphasize that they apply to 

information provided to CFIUS during 

the course of a withdrawal or with 

regard to a notice that is rejected under 

section 800.403. (As noted in 

§ 800.401(f), information provided 

during the course of pre-notice 

consultations is also protected by the 

confidentiality provisions of section 

721(c) and this section of the 

regulations.) In addition, paragraph (c) 

makes clear that the Chairperson’s 

public statements may reflect 

information that the parties to the 

transaction have already themselves 

publicly disclosed. 

Section 800.801. This new section 

implements the FINSA requirement that 

the regulations provide for the 

imposition of civil penalties for any 

violation of section 721, including a 

violation of any mitigation agreement 

entered into or conditions subsequent 

imposed pursuant to section 721(l). This 

section extends civil monetary penalties 

to transactions entered into on or after 

the effective date of FINSA, October 24, 

2007. In addition, paragraph (c) 

authorizes CFIUS to include in any 

mitigation agreement described in 

section 721(l) a liquidated damages 

provision tied to the harm to the 

national security that could result from 

a breach. 

Executive Order 12866 

These regulations are not subject to 

the requirements of Executive Order 

12866 because they relate to a foreign 

and military affairs function of the 

United States. 

Paperwork Reduction Act 

The collection of information 

contained in this notice of proposed 

rulemaking (in particular, sections 

800.401 and 800.402) have been 

submitted to the Office of Management 

and Budget for review in accordance 

with the Paperwork Reduction Act of 

1995 (44 U.S.C. 3507(d)). Comments on 

the collection of information should be 

sent to the Office of Management and 

Budget, Attn: Desk Officer for the 

Department of the Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, with copies to 

Nova Daly, Deputy Assistant Secretary, 

U.S. Department of the Treasury, 1500 

Pennsylvania Avenue, NW., 

Washington, DC 20220. Comments on 

the collection of information should be 

received by June 23, 2008. 

In accordance with 5 CFR 

1320.8(d)(1), the Department is 

soliciting comments from members of 

the public concerning this collection of 

information to: 

(1) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

(3) Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of the 

collection of information on those who 

are to respond; including through the 

use of appropriate automated collection 

techniques or other forms of information 

technology. 

The burden of the information 

collections in this proposed rule is 

estimated as follows: 

Estimated total annual reporting and/ 

or recordkeeping burden: 1200 hours. 

Estimated average annual burden per 

respondent: 100 hours. 

Estimated number of respondents: 

120 per year. 

Estimated annual frequency of 

responses: Not applicable. 

Under the Paperwork Reduction Act, 

an agency may not conduct or sponsor, 

and a person is not required to respond 

to, a collection of information unless it 

displays a valid control number 

assigned by the Office of Management 

and Budget. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.) generally requires 

an agency to prepare a regulatory 

flexibility analysis unless the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The RFA applies when an agency is 

required to publish a general notice of 

proposed rulemaking under section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. 553(b)), or any other law. 

As set forth below, because regulations 

issued pursuant to the Defense 

Production Act of 1950 (50 U.S.C. App 

2170) are not subject to the 

Administrative Procedure Act, or other 

law requiring the publication of a 

general notice of proposed rulemaking, 

the RFA does not apply. 

mstockstill on PROD1PC66 with PROPOSALS

21868 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

This regulation implements Section 

721 of the DPA. Section 709 of the DPA 

(50 U.S.C. App. 2159 as amended by 

section 136 of the Defense Production 

Act Amendments of 1992 (Pub. L. 102–

558)), provides that the regulations 

issued under it are not subject to the 

rulemaking requirements of the 

Administrative Procedure Act. Section 

709 of the DPA instead provides that 

any regulation issued under the DPA be 

published in the Federal Register and 

opportunity for public comment be 

provided for not less than 30 days. 

(Similarly, FINSA requires the President 

to direct the issuance of implementing 

regulations subject to notice and 

comment.) Section 709 of the DPA also 

provides that all comments received 

during the public comment period be 

considered and the publication of the 

final regulation contain written 

responses to such comments. Legislative 

history demonstrates that Congress 

intended that regulations under the DPA 

be exempt from the notice and comment 

provisions of the Administrative 

Procedure Act and instead provided that 

the agency include a statement that 

interested parties were consulted in the 

formulation of the regulation (see H.R. 

Conf. Rep. 102–1028 and H.R. Rep. 102–

208(II)). The limited public 

participation procedures described in 

the DPA do not require a general notice 

of proposed rulemaking as set forth in 

the RFA. Further, the mechanism for 

publication and public participation is 

sufficiently different to distinguish the 

DPA procedures from a rule that 

requires a general notice of proposed 

rulemaking. Moreover, in explaining the 

DPA amendments in 1992, Congress 

expressed its concerns about the 

potential threat to our national security 

preparedness posed by foreign 

domination of key dual use 

technologies. In providing the President 

with the authority to suspend or 

prohibit the acquisition, merger, or 

takeover of a domestic firm by a foreign 

firm if such action would threaten to 

impair the national security, Congress 

could not have contemplated that 

regulations implementing such 

authority would be subject to RFA 

analysis. For these reasons, the RFA 

does not apply to these regulations. 

Notwithstanding the inapplicability of 

the Regulatory Flexibility Act, we 

certify that this rule would not have a 

significant economic impact on a 

substantial number of small entities. 

These regulations provide for a 

voluntary system of notification, and 

historically less than ten percent of all 

foreign acquisitions of U.S. businesses 

are notified to CFIUS. Typically, some 

of the notices filed with CFIUS concern 

U.S. companies that would qualify as 

small entities. It is estimated that an 

average filing requires about 100 hours 

of preparation time. Based on the 

number of filings in 2007 and the 

number filed thus far in 2008, it is 

estimated that an average of 120 notices 

can be expected annually over the next 

few years. Of these notices, it is unlikely 

that more than 12 will be subject to 

protracted investigation or a mitigation 

agreement. As such, a substantial 

number of entities are not impacted by 

these rules regardless of their size. We 

also note that these proposed 

regulations, to a substantial degree, 

merely provide a detailed explanation of 

the current burdens of complying with 

CFIUS procedures and do not impose 

significant new burdens on entities 

subject to CFIUS. 

List of Subjects in 31 CFR Part 800 

Foreign investments in United States, 

Investigations, National defense, 

Reporting and recordkeeping 

requirements. 

Accordingly, under the authority at 50 

U.S.C. Appendix 2170(h), for the 

reasons stated in the preamble, the 

Department of the Treasury proposes to 

amend 31 CFR chapter VIII as follows: 

Chapter VIII—Office of Investment 

Security, Department of the Treasury 

1. The heading for chapter VIII is 

revised to read as set forth above. 

2. Part 800 is revised to read as 

follows: 

PART 800—REGULATIONS 

PERTAINING TO MERGERS, 

ACQUISITIONS, AND TAKEOVERS BY 

FOREIGN PERSONS 

Subpart A—General 

Sec. 

800.101 Scope. 

800.102 Effect on other laws. 

800.103 Applicability. 

800.104 Transactions or devices for 

avoidance. 

Subpart B—Definitions 

800.201 Certification. 

800.202 Committee; Chairperson of the 

Committee; Staff Chairperson. 

800.203 Control. 

800.204 Conversion. 

800.205 Convertible voting instrument. 

800.206 Covered transaction. 

800.207 Critical infrastructure. 

800.208 Critical technologies. 

800.209 Duly authorized designee. 

800.210 Effective date. 

800.211 Entity. 

800.212 Foreign entity. 

800.213 Foreign government. 

800.214 Foreign government-controlled 

transaction. 

800.215 Foreign national. 

800.216 Foreign person. 

800.217 Hold. 

800.218 Lead agency. 

800.219 Parent. 

800.220 Party or parties to a transaction. 

800.221 Person. 

800.222 Section 721. 

800.223 Solely for the purpose of 

investment. 

800.224 Transaction. 

800.225 United States. 

800.226 U.S. national. 

800.227 U.S. business. 

800.228 Voting interests. 

Subpart C—Coverage 

800.301 Transactions that are covered 

transactions. 

800.302 Transactions that are not covered 

transactions. 

800.303 Lending transactions. 

Subpart D—Notice 

800.401 Procedures for notice. 

800.402 Contents of voluntary notice. 

800.403 Deferral, rejection, or disposition of 

certain voluntary notices. 

Subpart E—Committee Procedures: Review 

and Investigation 

800.501 General. 

800.502 Beginning of thirty-day review 

period. 

800.503 Determination of whether to 

undertake an investigation. 

800.504 Determination not to undertake an 

investigation. 

800.505 Commencement of investigation. 

800.506 Completion or termination of 

investigation and report to the President. 

800.507 Withdrawal of notice. 

800.508 Role of the Secretary of Labor. 

Subpart F—Presidential Action 

800.601 Finality of actions under section 

721. 

Subpart G—Provision and Handling of 

Information 

800.701 Obligation of parties to provide 

information. 

800.702 Confidentiality. 

Subpart H—Penalties 

800.801 Penalties. 

Appendix to Part 800—Preamble to 

Regulations on Mergers, Acquisitions, 

and Takeovers by Foreign Persons 

(Published [date to be determined], 

2008.) 

Authority: Section 721 of Pub. L. 100–418, 

102 Stat. 1107, made permanent law by 

section 8 of Pub. L. 102–99, 105 Stat. 487 (50 

U.S.C. App. 2170) and amended by section 

837 of the National Defense Authorization 

Act for Fiscal Year 1993, Pub. L. 102–484, 

106 Stat. 2315, 2463; E.O. 12661, 54 FR 779, 

3 CFR, 1988 Comp., p. 618, and Pub. L. 110–

49, 121 Stat. 246 (the Foreign Investment and 

National Security Act of 2007). 

Subpart A—General 

§ 800.101 Scope. 

The regulations in this part 

implement section 721 of title VII of the 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21869 

Defense Production Act of 1950, as 

amended, hereinafter referred to as 

‘‘section 721’’ (see § 800.222). The 

definitions in this part are applicable to 

section 721 and these regulations. The 

principal purpose of section 721 is to 

authorize the President to suspend or 

prohibit any covered transaction when, 

in the President’s judgment, there is 

credible evidence to believe that the 

foreign person exercising control over a 

U.S. business (as defined in these 

regulations at § 800.227) might take 

action that threatens to impair the 

national security, and provisions of law 

other than section 721 and the 

International Emergency Economic 

Powers Act, do not, in the President’s 

judgment, provide adequate and 

appropriate authority for the President 

to protect the national security in the 

matter before the President. It is also a 

purpose of section 721 to authorize the 

Committee to mitigate any threat to the 

national security of the United States 

that arises as a result of a covered 

transaction. 

§ 800.102 Effect on other laws. 

Nothing in this part shall be 

construed to alter or affect any existing 

power, process, regulation, 

investigation, enforcement measure, or 

review provided by any other provision 

of law. 

§ 800.103 Applicability. 

Section 721 and the regulations in 

this part apply to transactions proposed 

or pending on or after the effective date 

(as defined in § 800.210). 

§ 800.104 Transactions or devices for 

avoidance. 

Any transaction or other device 

entered into or employed for the 

purpose of avoiding section 721 shall be 

disregarded, and section 721 and the 

regulations in this part shall be applied 

to the substance of the 

transaction. 

Corporation A is organized under the laws 

of a foreign state and is wholly owned and 

controlled by a foreign national. With a view 

towards avoiding possible application of 

section 721, Corporation A transfers money 

to a U.S. citizen, who, pursuant to informal 

arrangements with Corporation A and on its 

behalf, purchases all the shares in 

Corporation X, a U.S. business. That 

transaction is subject to section 721. 

Subpart B—Definitions 

§ 800.201 Certification. 

The term certification means a written 

statement signed by the chief executive 

officer or other duly authorized 

designee of a party to a transaction filing 

a notice or information, certifying that 

the notice or information filed: 

(a) fully complies with the 

requirements of section 721, the 

regulations in this part, and any 

agreement or condition entered into 

with the Committee or any member of 

the Committee, and 

(b) Is accurate and complete in all 

material respects, as it relates to: 

(1) The transaction, and 

(2) The party providing the 

certification, including its parents, 

subsidiaries, and any other related 

entities described in the notice or 

information. 

A sample certification may be found 

at the Committee’s section of the 

Department of the Treasury Web site at 

http://www.treas.gov/offices/ 

international-affairs/cfius/index.shtml. 

§ 800.202 Committee; Chairperson of the 

Committee; Staff Chairperson. 

The term Committee means the 

Committee on Foreign Investment in the 

United States. The Chairperson of the 

Committee is the Secretary of the 

Treasury. The Staff Chairperson of the 

Committee is the Department of the 

Treasury official so designated by the 

Secretary of the Treasury or by the 

Secretary’s designee. 

§ 800.203 Control. 

(a) The term control means the power, 

direct or indirect, whether or not 

exercised, through the ownership of a 

majority or a dominant minority of the 

total outstanding voting interest in an 

entity, board representation, proxy 

voting, a special share, contractual 

arrangements, formal or informal 

arrangements to act in concert, or other 

means, to determine, direct, or decide 

important matters affecting an entity; in 

particular, but without limitation, to 

determine, direct, take, reach, or cause 

decisions regarding the following 

matters, or any other similarly 

important matters affecting an entity: 

(1) The sale, lease, mortgage, pledge, 

or other transfer of any of the tangible 

or intangible principal assets of the 

entity, whether or not in the ordinary 

course of business; 

(2) The reorganization, merger, or 

dissolution of the entity; 

(3) The closing, relocation, or 

substantial alteration of the production, 

operational, or research and 

development facilities of the entity; 

(4) Major expenditures or 

investments, issuances of equity or debt, 

or dividend payments by the entity, or 

approval of the operating budget of the 

entity; 

(5) The selection of new business 

lines or ventures that the entity will 

pursue; 

(6) The entry into, termination, or 

non-fulfillment by the entity of 

significant contracts; 

(7) The policies or procedures of the 

entity governing the treatment of nonpublic technical, financial, or other 

proprietary information of the entity; 

(8) The appointment or dismissal of 

officers or senior managers; 

(9) The appointment or dismissal of 

employees with access to sensitive 

technology or classified U.S. 

Government information; or 

(10) The amendment of the Articles of 

Incorporation, constituent agreement, or 

other organizational documents of the 

entity with respect to the matters 

described in paragraphs (a)(1) through 

(9) of this section. 

(b) In examining questions of control 

in situations where more than one 

foreign person has an ownership 

interest in an entity, consideration will 

be given to factors such as whether the 

foreign persons are related or have 

formal or informal arrangements to act 

in concert, whether they are agencies or 

instrumentalities of the national or 

subnational governments of a single 

foreign state, and whether a given 

foreign person and another person that 

has an ownership interest in the entity 

are both controlled by any of the 

national or subnational governments of 

a single foreign state. 

(c) The following minority 

shareholder protections shall not in 

themselves be deemed to confer control 

over an entity: 

(1) The power to prevent the sale or 

pledge of all or substantially all of the 

assets of an entity; 

(2) The power to prevent an entity 

from entering into contracts with 

majority investors or their affiliates; 

(3) The power to prevent an entity 

from guaranteeing the obligations of 

majority investors or their affiliates; 

(4) The power to purchase additional 

shares to prevent the dilution of an 

investor’s pro rata interest in an entity 

in the event that the entity issues 

additional interests; or 

(5) The power to prevent the 

amendment of the Articles of 

Incorporation, constituent agreement, or 

other organizational documents of an 

entity with respect to the matters 

described in paragraphs (c)(1) through 

(4) of this section. 

(d) The Committee will consider, on 

a case-by-case basis, whether minority 

shareholder protections other than those 

listed in paragraph (c) of this section do 

not confer control over an entity. 

Example 1. Corporation A is a U.S. 

business. A U.S. investor owns 50 percent of 

the voting interest in Corporation A, and the 

remaining voting interest is owned in equal 

mstockstill on PROD1PC66 with PROPOSALS

21870 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

shares by five unrelated foreign investors. 

The foreign investors jointly financed their 

investment in Corporation A and vote as a 

single block on matters affecting Corporation 

A. The foreign investors have an informal 

arrangement to act in concert with regard to 

Corporation A, and, as a result, the foreign 

investors control Corporation A. 

Example 2. Same facts as in Example 1 

with regard to the composition of 

Corporation A’s shareholders. The foreign 

investors in Corporation A have no 

contractual or other commitments to act in 

concert, and have no informal arrangements 

to do so. Assuming no other relevant facts, 

the foreign investors do not control 

Corporation A. 

Example 3. Corporation A, a foreign 

person, is a private equity fund that routinely 

acquires substantial interests in companies 

and manages them for a period of time. 

Corporation B is a U.S. business. In addition 

to its acquisition of seven percent of 

Corporation B’s voting shares, Corporation A 

acquires the right to terminate significant 

contracts of Corporation B. Corporation A 

controls Corporation B. 

Example 4. Corporation A, a foreign 

person, is acquiring a nine percent interest in 

the shares of Corporation B, a U.S. business. 

As part of the transaction, Corporation A is 

also acquiring certain veto rights that 

determine important matters affecting 

Corporation B, including the right to veto the 

dismissal of senior executives of Corporation 

B. Corporation A controls Corporation B. 

Example 5. Corporation A, a foreign 

person, acquires an 11 percent interest in the 

shares of Corporation B, a U.S. business. 

Under a minority shareholder protection 

agreement, Corporation A receives the right 

to participate pro rata in future share 

issuances to prevent dilution of its 

percentage interest. Corporation A receives 

no other positive or negative rights with 

respect to Corporation B. Assuming no other 

relevant facts, Corporation A does not control 

Corporation B. 

Note to § 800.203: See § 800.302(c) 

regarding the Committee’s treatment of cases 

where a foreign person acquires 10 percent 

or less of the outstanding voting interests in 

a U.S. business solely for the purpose of 

investment. 

§ 800.204 Conversion. 

The term conversion means the 

exercise of a right inherent in the 

ownership or holding of particular 

financial instruments to exchange any 

such instruments for voting 

instruments. 

§ 800.205 Convertible voting instrument. 

The term convertible voting 

instrument means a financial 

instrument that currently does not 

entitle its owner or holder to voting 

rights but is convertible into a voting 

instrument. 

§ 800.206 Covered transaction. 

The term covered transaction means 

any transaction that is proposed or 

pending after the effective date by or 

with any foreign person, which could 

result in control of a U.S. business by 

a foreign person. 

§ 800.207 Critical infrastructure. 

The term critical infrastructure 

means, in the context of a particular 

covered transaction, systems and assets, 

whether physical or virtual, so vital to 

the United States that the incapacity or 

destruction of the particular systems or 

assets of the entity over which control 

is acquired pursuant to that covered 

transaction would have a debilitating 

impact on national security. 

§ 800.208 Critical technologies. 

The term critical technologies means: 

(a) Defense articles or defense services 

covered by the United States Munitions 

List (USML), which is set forth in the 

International Traffic in Arms 

Regulations (ITAR) (22 CFR parts 120–

130); 

(b) Those items specified on the 

Commerce Control List (CCL) set forth 

in Supplement No. 1 to part 774 of the 

Export Administration Regulations 

(EAR) (15 CFR parts 730–774) that are 

controlled pursuant to multilateral 

regimes (i.e., for reasons of national 

security, chemical and biological 

weapons proliferation, nuclear 

nonproliferation, or missile technology), 

as well as those that are controlled for 

reasons of regional stability or 

surreptitious listening; 

(c) Specially designed and prepared 

nuclear equipment, parts and 

components, materials software and 

technology specified in the Assistance 

to Foreign Energy Activities regulations 

(10 CFR part 810), and nuclear facilities, 

equipment, and material specified in the 

Export and Import of Nuclear 

Equipment and Materials regulations 

(10 CFR part 110); and 

(d) Select agents and toxins specified 

in the Export and Import of Select 

Agents and Toxins regulations (7 CFR 

part 331, 9 CFR part 121, and 42 CFR 

part 73). 

§ 800.209 Duly authorized designee. 

(a) The term duly authorized designee 

means: 

(1) In the case of a partnership, any 

general partner thereof; 

(2) In the case of a corporation, any 

officer or director thereof; 

(3) In the case of an entity lacking 

officers, directors, or partners, any 

individual within the organization 

exercising similar executive functions; 

and 

(4) In the case of an individual, such 

individual. 

(b) In each case described in 

paragraphs (a)(1) through (a)(4) of this 

section, such designee must possess 

actual authority to make the relevant 

certification on behalf of the person 

filing a notice or information. 

§ 800.210 Effective date. 

The term effective date means August 

23, 1988, the date section 721 became 

effective. 

§ 800.211 Entity. 

The term entity means any branch, 

partnership, group or sub-group, 

association, estate, trust, corporation or 

division of a corporation, or 

organization (whether or not organized 

under the laws of any State); assets 

operated by any one of the foregoing as 

a business undertaking in a particular 

location or for particular products or 

services, even though those assets may 

not be organized as a separate legal 

entity; and any government (including a 

foreign national or subnational 

government, the United States 

Government, a subnational government 

within the United States, and any 

agency, corporation, financial 

institution, or other entity or 

instrumentality thereof, including a 

government sponsored agency). 

§ 800.212 Foreign entity. 

The term foreign entity means: 

(a) A public company organized 

under the laws of a foreign state whose 

equity securities are primarily traded on 

one or more foreign exchanges; or 

(b) Any other entity organized under 

the laws of a foreign state in which 

foreign nationals hold, directly or 

indirectly, at least 50 percent of the 

outstanding ownership interest in an 

entity. 

§ 800.213 Foreign government. 

The term foreign government means 

any government or body exercising 

governmental functions, other than the 

government of the United States, a State 

of the United States, or a political 

subdivision of the United States or a 

State. The term includes, but is not 

limited to, national and subnational 

governments, including their respective 

departments, agencies, and 

instrumentalities, as well as individuals 

acting as non-elected heads of state with 

governmental responsibilities. 

§ 800.214 Foreign government-controlled 

transaction. 

The term foreign governmentcontrolled transaction means any 

covered transaction that could result in 

control of a U.S. business by a foreign 

government or a person controlled by or 

acting on behalf of a foreign 

government. 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21871 

§ 800.215 Foreign national. 

The term foreign national means any 

individual other than a U.S. national. 

§ 800.216 Foreign person. 

The term foreign person means: 

(a) Any foreign national, foreign 

government, or foreign entity; or 

(b) Any entity over which control is 

exercised or exercisable by a foreign 

national, foreign government, or foreign 

entity. 

Example 1. Corporation A is organized 

under the laws of a foreign state and is only 

engaged in business outside the United 

States. All of its shares are held by 

Corporation X, which controls Corporation 

A. Corporation X is organized in the United 

States, and is wholly owned and controlled 

by U.S. nationals. Assuming no other 

relevant facts, Corporation A, although 

organized and only operating outside the 

United States, is not a foreign person. 

Example 2. Same facts as in the first 

sentence of Example 1. The foreign state 

under whose laws Corporation A is organized 

exercises control over Corporation A, through 

government interveners. Corporation A is a 

foreign person. 

Example 3. Corporation A is organized in 

the United States, is engaged in interstate 

commerce in the United States, and is 

controlled by Corporation X. Corporation X 

is organized under the laws of a foreign state, 

and 50 percent of its shares are held by 

foreign nationals and 50 percent of its shares 

are held by U.S. nationals. Both Corporation 

A and Corporation X are foreign persons. 

Corporation A is also a U.S. business. 

Example 4. Corporation A is organized 

under the laws of a foreign state and is 

owned and controlled by a foreign national. 

Through a branch, Corporation A engages in 

interstate commerce in the United States. 

Corporation A (including its branch) is a 

foreign person. The branch also is a U.S. 

business. 

Example 5. Corporation A is a corporation 

organized under the laws of a foreign state. 

Forty-five percent of the voting interests in 

Corporation A are owned in equal shares by 

numerous unrelated foreign investors, none 

of whom has control. The foreign investors 

have no formal or informal arrangement, with 

regard to Corporation A, to act in concert 

with any other holder of voting interests in 

Corporation A. The remainder of the voting 

interests in Corporation A is held by U.S. 

investors. Assuming no other relevant facts, 

Corporation A is not a foreign person. 

Example 6. Same facts as Example 5, 

except that foreign investors own 55 percent 

of the voting interests in Corporation A. 

Assuming no other relevant facts, 

Corporation A is a foreign entity and, 

therefore, a foreign person. 

§ 800.217 Hold. 

The terms hold(s) and holding mean 

legal or beneficial ownership, whether 

direct or indirect, through fiduciaries, 

agents, or other means. 

§ 800.218 Lead agency. 

The term lead agency means an 

agency designated by the Chairperson of 

the Committee to have primary 

responsibility, on behalf of the 

Committee, for the specific activity for 

which the Chairperson designates it a 

lead agency, including all or a portion 

of a review, investigation, or negotiation 

or monitoring of mitigation agreements 

or conditions. 

§ 800.219 Parent. 

(a) The term parent means a person 

who or which directly or indirectly: 

(1) Holds or will hold at least 50 

percent of the outstanding voting 

interest in an entity; or 

(2) Holds or will hold the right to at 

least 50 percent of the profits of an 

entity, or has or will have the right in 

the event of the dissolution to at least 

50 percent of the assets of that entity. 

(b) Any entity that meets the 

conditions of paragraphs (a)(1) or (2) of 

this section with respect to another 

entity (i.e., an intermediate parent) is 

also a parent of any other entity of 

which the intermediate parent is a 

parent. 

Example 1. Corporation P holds 50 percent 

of the voting securities of Corporations R and 

S. Corporation R holds 40 percent of the 

voting securities of Corporation X; 

Corporation S holds 50 percent of the voting 

securities of Corporation Y, which in turn 

holds 50 percent of the voting securities of 

Corporation Z. Corporation P is a parent of 

Corporations R, S, Y and Z, but not of 

Corporation X. Corporation S is a parent of 

Corporations Y and Z, and Corporation Y is 

a parent of Corporation Z. 

Example 2. Corporation A holds warrants, 

exercisable at its sole discretion, which when 

exercised will entitle it to vote 50 percent of 

the outstanding shares of Corporation B. 

Corporation A is a parent of Corporation B. 

§ 800.220 Party or parties to a transaction. 

The terms party to a transaction and 

parties to a transaction mean: 

(a) In the case of an acquisition of an 

ownership interest in an entity, the 

person acquiring the ownership interest, 

and the person from which such 

ownership interest is acquired, without 

regard to any person providing 

brokerage or underwriting services for 

the transaction; 

(b) In the case of a merger, the 

surviving entity, and the entity or 

entities that are merged into that entity 

as a result of the transaction; 

(c) In the case of a consolidation, the 

entities being consolidated, and the new 

consolidated entity; 

(d) In the case of a proxy solicitation, 

the person soliciting proxies, and the 

person who issued the voting interest; 

(e) In the case of the conversion of 

convertible voting instruments, the 

issuer and the person holding the 

convertible voting instruments; and 

(f) In the case of any other type of 

transaction, any person who is in a role 

comparable to that of a person described 

in paragraphs (a) through (e) of this 

section. 

§ 800.221 Person. 

The term person means any 

individual or entity. 

§ 800.222 Section 721. 

The term section 721 means section 

721 of title VII of the Defense 

Production Act of 1950, 50 U.S.C. App. 

2170, as added by section 5021 of the 

Omnibus Trade and Competitiveness 

Act of 1988, Pub. L. 100–418, 102 Stat. 

1107, and as amended by Pub. L. 102–

484, 106 Stat. 2463, and the Foreign 

Investment and National Security Act of 

2007, Public Law 110–49, 121 Stat. 246. 

§ 800.223 Solely for the purpose of 

investment. 

Ownership interests are held or 

acquired ‘‘solely for the purpose of 

investment’’ if the person holding or 

acquiring such interests has no plans or 

intention of exercising control, does not 

possess or develop any purpose other 

than investment, and does not take any 

action inconsistent with acquiring or 

holding such interests solely for the 

purpose of investment. (See 

§ 800.302(c).) 

§ 800.224 Transaction. 

The term transaction means a 

proposed or consummated merger, 

acquisition, or takeover. It includes: 

(a) The acquisition of an ownership 

interest in an entity. 

(b) The acquisition or conversion of 

convertible voting instruments of an 

entity. 

(c) The acquisition of proxies from 

holders of a voting interest in an entity. 

(d) A merger or consolidation. 

(e) The formation of a joint venture. 

(f) A long-term lease under which a 

lessee makes substantially all business 

decisions concerning the operation of a 

leased entity, as if it were the owner. 

Example. Corporation A, a foreign person, 

signs a concession agreement to operate the 

toll road business of Corporation B, a U.S. 

business, for 99 years. However, Corporation 

B is required under the agreement to perform 

safety and security functions with respect to 

the business and to monitor compliance by 

Corporation A with the operating 

requirements of the agreement on an ongoing 

basis. Corporation B may terminate the 

agreement or impose other penalties for 

breach of these operating requirements. 

Assuming no other relevant facts, this is not 

a transaction. 

mstockstill on PROD1PC66 with PROPOSALS

21872 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

§ 800.225 United States. 

The term United States or U.S. means 

the United States of America, the States 

of the United States, the District of 

Columbia, and any commonwealth, 

territory, dependency, or possession of 

the United States, or any subdivision of 

the foregoing, and includes the Outer 

Continental Shelf, as defined in section 

2(a) of the Outer Continental Shelf 

Lands Act (43 U.S.C. 1131(a)). For 

purposes of these regulations and their 

examples, an entity organized under the 

laws of the United States of America, 

one of the States, the District of 

Columbia, or a commonwealth, 

territory, dependency or possession of 

the United States, is an entity organized 

‘‘in the United States.’’

§ 800.226 U.S. national. 

The term U.S. national means a 

citizen of the United States or an 

individual who, although not a citizen 

of the United States, owes permanent 

allegiance to the United States. 

§ 800.227 U.S. business. 

The term U.S. business means any 

entity, irrespective of the nationality of 

the persons that control it, engaged in 

interstate commerce in the United 

States, but only to the extent of its 

activities in interstate commerce. 

Example 1. Corporation A is organized 

under the laws of a foreign state and is 

wholly owned and controlled by a foreign 

national. It engages in interstate commerce in 

the United States through a branch or 

subsidiary. Its branch or subsidiary is a U.S. 

business. Each is also a foreign person for 

purposes of acquiring a U.S. business. 

Example 2. Same facts as in the first 

sentence of Example 1. Corporation A, 

however, does not have a branch office, 

subsidiary or fixed place of business in the 

United States. It exports and licenses 

technology to an unrelated company in the 

United States. Assuming no other relevant 

facts, Corporation A is not a U.S. business. 

Example 3. Corporation A, a company 

organized under the laws of a foreign state, 

is wholly owned and controlled by 

Corporation X. Corporation X is organized in 

the United States and is wholly owned and 

controlled by U.S. nationals. Corporation A 

does not have a branch office, subsidiary, or 

fixed place of business in the United States. 

It exports goods to Corporation X and to 

unrelated companies in the United States. 

Assuming no other relevant facts, 

Corporation A is not a U.S. business. 

§ 800.228 Voting interests. 

The term voting interests means any 

interests in an entity that entitle the 

owner or holder thereof to vote for the 

election of directors of the entity (or, 

with respect to unincorporated entities, 

individuals exercising similar functions) 

or to vote on other matters affecting the 

entity. 

Subpart C—Coverage 

§ 800.301 Transactions that are covered 

transactions. 

Transactions that are covered 

transactions include, without limitation: 

(a) A transaction which, irrespective 

of the actual arrangements for control 

provided for in the terms of the 

transaction, results or could result in 

control of a U.S. business by a foreign 

person. 

Example 1. Corporation A, a foreign 

person, proposes to purchase all the shares 

of Corporation X, which is a U.S. business. 

As the sole owner, Corporation A will have 

the right to elect directors and appoint other 

primary officers of Corporation X, and those 

directors will have the right to make 

decisions about the closing and relocation of 

particular production facilities, and the 

termination of significant contracts. The 

directors also will have the right to propose 

to Corporation A, the sole shareholder, the 

dissolution of Corporation X and the sale of 

its principal assets. The proposed transaction 

is a covered transaction. 

Example 2. Same facts as in Example 1, 

except that Corporation A plans to retain the 

existing directors of Corporation X, all of 

whom are U.S. nationals. Although 

Corporation A may choose not to exercise its 

power to elect new directors for Corporation 

X, Corporation A nevertheless retains that 

exercisable power. The proposed transaction 

is a covered transaction. 

Example 3. Corporation A, a foreign 

person, proposes to purchase 50 percent of 

the shares in Corporation X, a U.S. business, 

from Corporation B, also a U.S. business. 

Corporation B would retain the other 50 

percent of the shares in Corporation X, and 

Corporation A and Corporation B would 

contractually agree that Corporation A would 

not exercise its voting and other rights for ten 

years. The proposed transaction is a covered 

transaction. 

(b) A transaction in which a foreign 

person conveys its control of a U.S. 

business to another foreign person. 

Example. Corporation X is a U.S. business, 

but is wholly owned and controlled by 

Corporation Y, a foreign person. Corporation 

Z, also a foreign person, but not related to 

Corporation Y, seeks to acquire Corporation 

X from Corporation Y. The proposed 

transaction is a covered transaction because 

it could result in control of Corporation X, a 

U.S. business in this context, by another 

foreign person, Corporation Z. 

(c) A transaction that results or could 

result in control by a foreign person of 

assets that constitute a U.S. business. 

(See § 800.302(d).) 

Example 1. Corporation A, a foreign 

person, proposes to buy a branch office in the 

United States of Corporation X, which is a 

foreign person. Corporation X is a U.S. 

business to the extent of its branch office in 

the United States. The proposed transaction 

is a covered transaction. 

Example 2. Corporation A, a foreign 

person, buys a branch office located entirely 

outside the United States of Corporation Y, 

which is incorporated in the United States. 

Assuming no other relevant facts, the branch 

office of Corporation Y is not a U.S. business, 

and the transaction is not a covered 

transaction. 

Example 3. Corporation A, a foreign 

person, makes a start-up, or ‘‘greenfield,’’

investment in the United States. That 

investment involves such activities as 

separately arranging for the financing of and 

the construction of a plant to make a new 

product, buying supplies and inputs, hiring 

personnel and purchasing the necessary 

technology. The investment may involve the 

acquisition of shares in a newly incorporated 

subsidiary. Assuming no other relevant facts, 

Corporation A will not have acquired a U.S. 

business, and its greenfield investment is not 

a covered transaction. 

Example 4. Corporation A, a foreign 

person, purchases substantially all the assets 

of Corporation B. Corporation B, which is 

incorporated in the United States, was in the 

business of producing industrial equipment, 

but stopped producing and selling such 

equipment one week before Corporation A 

purchased substantially all of its assets. At 

the time of the transaction, Corporation B 

continued to have employees on its payroll, 

maintained know-how in producing the 

industrial equipment it previously produced, 

and maintained relationships with its prior 

customers, all of which were transferred to 

Corporation A. The acquisition of 

substantially all of the assets of Corporation 

B by Corporation A is a covered transaction. 

Example 5. Corporation A, a foreign 

person, owns businesses both outside the 

United States and in the United States. 

Corporation B, a foreign person, acquires 

Corporation A. The acquisition of 

Corporation A by Corporation B is a covered 

transaction with respect to Corporation A’s 

businesses in the United States. 

Example 6. Corporation X, a foreign 

person, seeks to acquire from Corporation A, 

a U.S. business, an empty warehouse facility 

located in the United States. The acquisition 

would be limited to the physical facility, and 

would not include customer lists, intellectual 

property, or other proprietary information, or 

other intangible assets or the transfer of 

personnel. Assuming no other relevant facts, 

the facility is not an entity and therefore not 

a U.S. business, and the proposed acquisition 

of the facility is not a covered transaction. 

Example 7. Same facts as Example 6, 

except that, in addition to the proposed 

acquisition of Corporation A’s warehouse 

facility, Corporation X would acquire the 

personnel, customer list, equipment, and 

inventory management software used to 

operate the facility. Under these facts, 

Corporation X is acquiring a U.S. business, 

and the proposed acquisition is a covered 

transaction. 

(d) A joint venture in which the 

parties enter into a contractual or other 

similar arrangement, including an 

agreement on the establishment of a 

new entity, but only if one of the parties 

contributes a U.S. business and a foreign 

person gains control over that U.S. 

business by means of the joint venture. 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21873 

Example 1. Corporation A, a foreign 

person, and Corporation X, a U.S. business, 

form a separate corporation, JV Corporation, 

to which Corporation A contributes only cash 

and Corporation X contributes a U.S. 

business. Each owns 50 percent of the shares 

of JV Corporation and, under the Articles of 

Incorporation of JV Corporation, both 

Corporation A and Corporation X have veto 

power over all of the matters affecting JV 

Corporation identified under § 800.203(a)(1) 

through (10), giving them both control over 

JV Corporation. The formation of JV 

Corporation is a covered transaction. 

Example 2. Corporation A, a foreign 

person, and Corporation X, a U.S. business, 

form a separate corporation, JV Corporation, 

to which Corporation A contributes funding 

and managerial and technical personnel, 

while Corporation X contributes certain land 

and equipment that do not in this example 

constitute a U.S. business. Corporations A 

and B each have a 50 percent interest in the 

joint venture. Assuming no other relevant 

facts, the formation of JV Corporation is not 

a covered transaction. 

§ 800.302 Transactions that are not 

covered transactions. 

Transactions that are not covered 

transactions include, without limitation: 

(a) A stock split or pro rata stock 

dividend that does not involve a change 

in control. 

Example. Corporation A, a foreign person, 

holds 10,000 shares of Corporation B, a U.S. 

business, constituting 10 percent of the stock 

of Corporation B. Corporation B pays a 2-for1 stock dividend. As a result of this stock 

split, Corporation A holds 20,000 shares of 

Corporation B, still constituting 10 percent of 

the stock of Corporation B. Assuming no 

other relevant facts, the acquisition of 

additional shares is not a covered 

transaction. 

(b) An acquisition of convertible 

voting instruments that does not involve 

control. In determining whether an 

acquisition of convertible voting 

instruments may involve control, 

consideration will be given to factors 

such as whether the date of conversion 

has been agreed upon by the parties or 

is within the power of the acquiring 

entity to determine, and whether the 

amount of voting interests that would be 

acquired upon conversion can be 

reasonably determined at the time of the 

acquisition of the instruments. 

Example 1. Corporation A, a foreign 

person, buys debentures, options and 

warrants of Corporation X, a U.S. business. 

By their terms, the debentures are convertible 

into common stock, and the options and 

warrants can be exercised for common stock, 

only upon the occurrence of an event the 

timing of which is not in the control of the 

holder of the stock. Assuming no other 

relevant facts, the acquisition of those 

debentures, options and warrants is not a 

covered transaction. The conversion of those 

debentures into, or the exchange of those 

options and warrants for, common stock 

could be a covered transaction, depending on 

what percentage of Corporation X’s voting 

securities Corporation A receives and what 

powers those securities confer on 

Corporation A pursuant to § 800.203. 

Example 2. Same facts as Example 1, 

except that the securities at issue are 

convertible or exercisable at the sole 

discretion of Corporation A after one year, 

and if converted, would represent a 50 

percent interest in Corporation X. The 

acquisition of these debentures, options and 

warrants by Corporation A is a covered 

transaction. 

(c) A transaction that results in a 

foreign person holding ten percent or 

less of the outstanding voting interests 

in a U.S. business (regardless of the 

dollar value of the interests so 

acquired), but only if the transaction is 

solely for the purpose of investment (see 

§ 800.223). 

Example 1. In an open market purchase 

solely for the purpose of investment, 

Corporation A, a foreign person, acquires 

seven percent of the voting securities of 

Corporation X, which is a U.S. business. 

Assuming no other relevant facts, the 

acquisition of the securities is not a covered 

transaction. 

Example 2. Corporation A, a foreign 

person, acquires nine percent of the voting 

shares of Corporation X, a U.S. business. 

Corporation A also negotiates contractual 

rights that give it the power to control 

important matters of Corporation X. The 

acquisition by Corporation A of the voting 

shares of Corporation X is not solely for the 

purpose of investment, and therefore 

constitutes a covered transaction. 

Example 3. Corporation A, a foreign 

person, acquires five percent of the voting 

shares in Corporation B, a U.S. business. In 

addition to the securities, Corporation A 

obtains the right to appoint one out of 11 

seats on Corporation B’s Board of Directors. 

The acquisition by Corporation A of 

Corporation B’s securities is not solely for the 

purpose of investment. Whether the 

transaction is a covered transaction would 

depend on whether Corporation A obtains 

control of Corporation B as a result of the 

transaction. 

(d) An acquisition of assets or any 

part of an entity in the United States 

that does not constitute a U.S. business. 

(See § 800.301(c).) 

Example 1. Corporation A, a foreign 

person, acquires, from separate U.S. 

nationals: (a) products held in inventory, (b) 

land, and (c) machinery for export. Assuming 

no other relevant facts, Corporation A has not 

acquired a U.S. business, and this acquisition 

is not a covered transaction. 

Example 2. Corporation X produces 

armored personnel carriers in the United 

States. Corporation A, a foreign person, seeks 

to acquire the annual production of those 

carriers from Corporation X under a longterm contract. Assuming no other relevant 

facts, this transaction is not a covered 

transaction. 

Example 3. Same facts as Example 2, 

except that Corporation X, a U.S. business, 

has developed important technology in 

connection with the production of armored 

personnel carriers. Corporation A seeks to 

negotiate an agreement under which it would 

be licensed to manufacture using that 

technology. Assuming no other relevant facts, 

neither the proposed acquisition of 

technology pursuant to that license 

agreement, nor the actual acquisition, is a 

covered transaction. 

Example 4. Same facts as Example 2, 

except that Corporation A enters into a 

contractual arrangement to acquire the entire 

armored personnel carrier business 

operations of Corporation X, including 

production facilities, customer lists, 

technology and staff. This transaction is a 

covered transaction. 

Example 5. Same facts as Example 2, 

except that Corporation X suspended all 

activities of its armored personnel carrier 

business a year ago and currently is in 

bankruptcy proceedings. Existing equipment 

provided by Corporation X is being serviced 

by another company, which purchased the 

service contracts from Corporation X. The 

business’s production facilities are idle but 

still in working condition, some of its key 

former employees have agreed to return if the 

business is resuscitated, and its technology 

and customer and vendor lists are still 

current. Corporation X’s personnel carrier 

business constitutes a U.S. business, and its 

purchase by Corporation A is a covered 

transaction. 

(e) An acquisition of securities by a 

person acting as a securities 

underwriter, in the ordinary course of 

business and in the process of 

underwriting. 

(f) An acquisition pursuant to a 

condition in a contract of insurance 

relating to fidelity, surety, or casualty 

obligations if the contract was made by 

an insurer in the ordinary course of 

business. 

(g) An acquisition of a security 

interest, but not control, in the voting 

securities or assets of a U.S. business at 

the time a loan or other financing is 

extended. (See § 800.303.) 

§ 800.303 Lending transactions. 

(a) The extension of a loan or similar 

financing by a foreign person to a U.S. 

business, accompanied by the creation 

in the foreign person of a secured 

interest in securities or other assets of 

the U.S. business, does not, by itself, 

constitute a covered transaction. 

However, if control over a U.S. business 

is acquired by the foreign person at the 

time the loan or other financing is 

extended, then the transaction is a 

covered transaction. 

(1) The Committee will accept notices 

concerning transactions that involve 

loans or financing by foreign persons 

only when, because of imminent or 

actual default or other condition, there 

is a significant possibility that the 

mstockstill on PROD1PC66 with PROPOSALS

21874 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

foreign person may obtain control of the 

U.S. business. 

(2) For purposes of this section, in 

determining whether a transaction of 

the type described in paragraph (1) that 

involves a foreign person that makes 

loans in the ordinary course of business 

is a covered transaction, the Committee 

will take into account whether the 

foreign person has made any 

arrangements to transfer management 

decisions or day-to-day control over the 

U.S. business to U.S. nationals. 

(b) Control will not be deemed to be 

acquired in cases involving an 

acquisition of voting interests or assets 

of a U.S. business by a foreign person 

upon default, or other condition, 

involving a loan or other financing, 

provided that the loan was made by a 

syndicate of banks in a loan 

participation where the foreign lender 

(or lenders) in the syndicate: 

(1) Needs the majority consent of the 

U.S. participants in the syndicate to take 

action, and cannot on its own initiate 

any action vis-a`-vis the debtor; or 

(2) Does not have a lead role in the 

syndicate, and is subject to a provision 

in the loan or financing documents 

limiting its ability to control the debtor 

such that control for purposes of 

§ 800.203 could not be acquired. 

Example 1. Corporation A, which is a U.S. 

business, borrows funds from Corporation B, 

a bank organized under the laws of a foreign 

state and controlled by foreign persons. As a 

condition of the loan, Corporation A agrees 

not to sell or pledge its principal assets to 

any other person. Assuming no other relevant 

facts, this lending arrangement does not 

constitute a covered transaction. 

Example 2. Same facts as in Example 1, 

except that Corporation A defaults on its loan 

from Corporation B and seeks bankruptcy 

protection. Corporation A has no funds with 

which to satisfy Corporation B’s claim, which 

is greater than the value of Corporation A’s 

principal assets. Corporation B’s secured 

claim constitutes the only secured claim 

against Corporation A’s principal assets, 

creating a high probability that Corporation 

B will receive title to Corporation A’s 

principal assets, which constitute a U.S. 

business. Assuming no other relevant facts, 

the Committee would accept a notice of the 

impending bankruptcy court adjudication 

transferring control of Corporation A’s 

principal assets to Corporation B, which 

would constitute a covered transaction. 

Subpart D—Notice 

§ 800.401 Procedures for notice. 

(a) A party or parties to a proposed or 

completed transaction may file a 

voluntary notice of the transaction with 

the Committee. Voluntary notice to the 

Committee is filed by sending: 

(1) One paper copy of the notice to the 

Staff Chairperson, Office of Investment 

Security, Department of the Treasury, 

1500 Pennsylvania Avenue, NW., 

Washington, DC 20220, that includes, in 

English only, the information set out in 

§ 800.402, including the certification 

required under paragraph (l) of that 

section; and 

(2) One electronic copy of the same 

information required in paragraph (a)(1) 

of this section. See the Committee’s 

section of the Department of the 

Treasury Web site, at http:// 

www.treas.gov/offices/internationalaffairs/cfius/index.shtml for electronic 

submission instructions. 

(b) If the Committee determines that 

a transaction for which no voluntary 

notice has been filed under paragraph 

(a) of this section may be a covered 

transaction and raises national security 

considerations, the Staff Chairperson, 

acting on the recommendation of the 

Committee, may request the parties to 

the transaction to provide to the 

Committee the information necessary to 

determine whether the transaction is a 

covered transaction, and if the 

Committee determines that the 

transaction is a covered transaction, to 

file a notice under paragraph (a) of such 

covered transaction. 

(c) Any member of the Committee, at 

or above the Under Secretary or 

equivalent level, may file an agency 

notice to the Committee through the 

Staff Chairperson regarding a 

transaction for which no voluntary 

notice has been filed under paragraph 

(a) of this section if that member has 

reason to believe that the transaction is 

a covered transaction and may raise 

national security considerations. 

Notices filed under this paragraph are 

deemed accepted upon their receipt by 

the Staff Chairperson. In the event that 

an agency notice is filed, the Staff 

Chairperson will promptly furnish the 

parties to the transaction with written 

advice of such notice. No agency notice 

under this paragraph shall be made with 

respect to a transaction more than three 

years after the date of the completion of 

the transaction, unless the Chairperson 

of the Committee, in consultation with 

other members of the Committee, 

requests such an agency notice. 

(d) No communications other than 

those described in paragraphs (a) and (c) 

of this section shall constitute notice for 

purposes of section 721. 

(e) Upon receipt of the certification 

required by § 800.402(l) and an 

electronic copy of a notice filed under 

paragraph (a) of this section, the Staff 

Chairperson shall promptly inspect 

such notice for completeness. 

(f) Parties to a transaction are 

encouraged to consult with the 

Committee in advance of filing a notice 

and, in appropriate cases, to file with 

the Committee a draft notice or other 

appropriate documents to aid the 

Committee’s understanding of the 

transaction and to provide an 

opportunity for the Committee to 

request additional information to be 

included in the notice. Any such prenotice consultation should take place, or 

any draft notice should be provided, at 

least five business days before the filing 

of a voluntary notice. All information 

and documentary material made 

available to the Committee pursuant to 

this paragraph shall be considered to 

have been filed with the President or the 

President’s designee for purposes of 

section 721(c) and § 800.702, and shall 

be considered part of any notice filed 

under section 721(b). 

(g) Information and other 

documentary material provided by the 

parties to the Committee after the filing 

of a voluntary notice under § 800.401 

shall be part of the notice, and shall be 

subject to the certification requirements 

of § 800.402(l). 

§ 800.402 Contents of voluntary notice. 

(a) If the parties to a transaction file 

a voluntary notice, they shall provide in 

detail the information set out in this 

section, which must be accurate and 

complete with respect to all parties and 

to the transaction. (See also paragraph 

(l) of this section and § 800.701(d) 

regarding certification requirements.) 

(b) In the case of a hostile takeover, if 

fewer than all the parties to a 

transaction file a voluntary notice, each 

notifying party shall provide the 

information set out in this section with 

respect to itself and, to the extent 

known or reasonably available to it, 

with respect to each non-notifying 

party. 

(c) A voluntary notice filed pursuant 

to § 800.401(a) shall describe: 

(1) The transaction in question, 

including: 

(i) A summary setting forth the 

essentials of the transaction, including a 

statement of the purpose of the 

transaction, and its scope, both within 

and outside of the United States; 

(ii) The nature of the transaction, for 

example, whether the acquisition is by 

merger, consolidation, the purchase of 

voting interests, or otherwise; 

(iii) The name, United States address 

(if any), Web site address (if any), 

nationality (for individuals) or place of 

incorporation or other legal organization 

(for entities), and address of the 

principal place of business of each 

foreign person that is a party to the 

transaction; 

(iv) The name, address, Web site 

address (if any), principal place of 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21875 

business, and place of incorporation or 

other legal organization of the U.S. 

business that is the subject of the 

transaction; 

(v) The name, address, and nationality 

(for individuals) or place of 

incorporation or other legal organization 

(for entities) of: 

(A) The immediate parent, the 

ultimate parent, and each intermediate 

parent, if any, of the foreign person that 

is a party to the transaction; 

(B) Where the ultimate parent is a 

private company, the ultimate owner(s) 

of such parent; and 

(C) Where the ultimate parent is a 

public company, any shareholder with 

an interest of greater than five percent 

in such parent. 

(vi) The name, address, Web site 

address (if any), and nationality (for 

individuals) or place of incorporation or 

other legal organization (for entities) of 

the person that will ultimately control 

the U.S. business being acquired; 

(vii) The expected date for completion 

of the transaction, or the date it was 

completed; 

(viii) The price paid for the interest in 

the U.S. business in U.S. dollars, or, 

where the price does not accurately 

reflect the full value provided for the 

interest in the U.S. business, a statement 

of such value and a description of how 

it was derived; and 

(ix) The name of any and all financial 

institutions involved in the transaction, 

including as advisors, underwriters, or a 

source of financing for the transaction. 

(2) With respect to a transaction 

structured as an acquisition of assets of 

a business, a detailed description of the 

assets of the U.S. business being 

acquired, including the approximate 

value of those assets in U.S. dollars; 

(3) With respect to the U.S. business 

that is the subject of the transaction, and 

any entity of which that U.S. business 

is a parent that is also a subject of the 

transaction: 

(i) Their respective business activities, 

as, for example, set forth in annual 

reports, and the product or service lines 

of each, including an estimate of U.S. 

market share for primary product or 

service lines and an explanation of how 

that estimate was derived, and a list of 

direct competitors for those primary 

product or service lines; 

(ii) The street address (or mailing 

address, if different) within the United 

States and Web site address (if any) of 

each facility that is manufacturing 

classified or unclassified products or 

producing services described in 

paragraph (c)(3)(v) of this section, their 

respective Commercial and Government 

Entity Code (CAGE Code), assigned by 

the Department of Defense, their Dun 

and Bradstreet identification (DUNS) 

number, and their North American 

Industry Classification System (NAICS) 

Code, if any; 

(iii) Each contract (identified by 

agency and number) that is currently in 

effect or was in effect within the past 

five years, with any agency of the 

United States Government involving 

any information, technology or data that 

is classified under Executive Order 

12958, as amended, its estimated final 

completion date, and the name, office, 

and telephone number of the 

contracting official; 

(iv) Any other contract (identified by 

agency and number) currently in effect, 

or that was in effect within the past 

three years, with any agency of the 

United States Government, its estimated 

final completion date, and the name, 

office, and telephone number of the 

contracting official; 

(v) Any products or services 

(including research and development): 

(A) That it supplies, directly or 

indirectly, to any agency of the United 

States Government, including as a prime 

contractor or first tier subcontractor; a 

supplier to any such prime contractor or 

subcontractor; or, if known by the 

parties filing the notice, a subcontractor 

at any tier; 

(B) If known by the parties filing the 

notice, for which it is a single qualified 

source (i.e., other acceptable suppliers 

are readily available to be so qualified) 

or a sole source (i.e., no other supplier 

has needed technology, equipment, and 

manufacturing process capabilities) of a 

particular product or service for such 

agencies and whether there are other 

suppliers in the market that are 

available to be so qualified. 

(vi) Any products or services 

(including research and development) 

that: 

(A) It supplies to third parties and it 

knows are rebranded by the purchaser 

or incorporated into the products of 

another entity, and the names or brands 

under which such rebranded products 

or services are sold; and 

(B) In the case of services, it provides 

on behalf of, or under the name of, 

another entity, and the name of any 

such entities; 

(vii) For the prior three years—

(A) The number of priority rated 

contracts or orders under the Defense 

Priorities and Allocations System 

(DPAS) regulation (15 CFR part 700) 

that the U.S. business that is the subject 

of the transaction has received and the 

level of priority of such contracts or 

orders (‘‘DX’’ or ‘‘DO’’); and 

(B) The number of such priority rated 

contracts or orders that the U.S. 

business has placed with other entities 

and the level of priority of such 

contracts or orders, and its plan to 

ensure that any new entity formed at the 

completion of the notified transaction 

complies with the DPAS regulation; 

(viii) A description and copy of the 

cyber security plan, if any, that will be 

used to protect against cyber attacks on 

the operation, design, and development 

of the U.S. business’s services, 

networks, systems, data storage, and 

facilities. 

(4) Whether the U.S. business that is 

being acquired produces or trades in: 

(i) Items that are subject to EAR and, 

if so, a description (which may group 

similar items into general product 

categories) of the items and a list of the 

relevant commodity classifications set 

forth on the CCL (i.e., Export Control 

Classification Numbers (ECCNs) or 

EAR99 designation); 

(ii) Defense articles and defense 

services, and related technical data 

covered by the USML in the ITAR, and, 

if so, the category of the USML, 

including: 

(A) Defense articles, services, and 

technical data for which commodity 

jurisdiction determinations (22 CFR 

120.4) are pending; and 

(B) Defense articles, services, and 

technical data that have not been, but 

may be, designated or determined to be 

covered by the USML, pursuant to 22 

CFR 120.3; 

(iii) Products and technology that are 

subject to export authorization 

administered by the Department of 

Energy (10 CFR part 810), or export 

licensing requirements administered by 

the Nuclear Regulatory Commission (10 

CFR part 110); or 

(iv) Select Agents and Toxins (7 CFR 

part 331, 9 CFR 121, and 42 CFR part 

73); 

(5) Whether the U.S. business that is 

the subject of the transaction: 

(i) Possesses any licenses, permits, or 

other authorizations other than those 

under the regulatory authorities listed in 

paragraph (4) of this section that have 

been granted by an agency of the United 

States Government (if applicable, 

identification of the relevant licenses 

shall be provided); or 

(ii) Has technology that has military 

applications (if so, an identification of 

such technology and a description of 

such military applications shall be 

included). 

(6) With respect to the foreign person 

engaged in the transaction and its 

parents: 

(i) The business or businesses of the 

foreign person and its ultimate parent, 

as such businesses are described, for 

example, in annual reports. Provide 

mstockstill on PROD1PC66 with PROPOSALS

21876 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

CAGE codes, NAICS codes, and DUNS 

numbers, if any, for such businesses; 

(ii) The plans of the foreign person for 

the U.S. business with respect to: 

(A) Reducing, eliminating, or selling 

research and development facilities; 

(B) Changing product quality; 

(C) Shutting down or moving outside 

of the United States facilities that are 

within the United States; 

(D) Consolidating or selling product 

lines or technology; 

(E) Modifying or terminating contracts 

referred to in paragraphs (c)(3)(iii) and 

(iv) of this section; or 

(F) Eliminating domestic supply by 

selling products solely to non-domestic 

markets. 

(iii) Whether the foreign person is 

controlled by or acting on behalf of a 

foreign government, including as an 

agent or representative, or in some 

similar capacity; 

(iv) Whether a foreign government or 

a person controlled by or acting on 

behalf of a foreign government: 

(A) Has or controls ownership 

interests or convertible voting 

instruments of the acquiring foreign 

person or any parent of the acquiring 

foreign person, and if so, the nature and 

percentage amount of any such 

instruments; 

(B) Has the right or power to appoint 

any of the principal officers or the 

members of the board of directors of the 

acquiring foreign person or any parent 

of the foreign person that is a party to 

the transaction; 

(C) Holds any contingent interest (for 

example, such as might arise from a 

lending transaction) in the foreign 

acquiring party and, if so, the rights that 

are covered by this contingent interest, 

and the manner in which they would be 

enforced; or 

(D) Has any other affirmative or 

negative rights or powers that could be 

relevant to the Committee’s 

determination of whether the notified 

transaction is a foreign governmentcontrolled transaction; and if there are 

any such rights or powers, describe their 

source (for example, a ‘‘golden share,’’

shareholders agreement, contract, 

statute, or regulation) and the 

mechanics of their operation; 

(v) A description of any formal or 

informal arrangements among foreign 

ownership interest holders of the 

foreign person or between the foreign 

person and other persons to act in 

concert on particular matters affecting 

the U.S. business that is the subject of 

the transaction and a copy of any 

documents that establish those rights or 

describe those arrangements; 

(vi) Biographical information of 

members of the board of directors, 

senior management, and the ultimate 

beneficial owner of five percent or more 

of the following: 

(A) The foreign person engaged in the 

transaction; 

(B) The immediate parent of the 

foreign person engaged in the 

transaction; and 

(C) The ultimate parent of the foreign 

person engaged in the transaction. 

(vii) The following ‘‘personal 

identifier information,’’ which, for 

privacy reasons, and to ensure limited 

distribution, shall be set forth in a 

separate document, not in the main 

notice, with regard to current members 

of the board or boards of directors 

(including boards comprised partially or 

entirely of external members) and senior 

executives of the immediate acquirer 

and its ultimate parent, and any other 

entities in the same chain of ownership 

that could exercise control over the U.S. 

business being acquired, and any 

natural person having an ownership 

interest of five percent or more in the 

ultimate parent of the acquirer: 

(A) Full name (last, first, middle 

name); 

(B) All other names and aliases used; 

(C) Business address; 

(D) Country and city of residence; 

(E) Date of birth; 

(F) Place of birth; 

(G) U.S. Social Security number 

(where applicable); 

(H) National identity number, 

including nationality, date and place of 

issuance and expiration date (where 

applicable); 

(I) U.S. and foreign passport number 

(if more than one, all must be fully 

disclosed), nationality, date and place of 

issuance and expiration date and, if a 

U.S. visa holder, the visa type and 

number, date and place of issuance and 

expiration date; and 

(J) Dates and nature of foreign 

government and foreign military service 

(where applicable); 

(viii) The following ‘‘business 

identifier information’’ for parents of the 

immediate acquirer, including the 

ultimate parent, and any other entities 

in the same chain of ownership that 

could exercise control over the U.S. 

business that is the subject of the 

transaction: 

(A) Business name, including all 

names under which the business is 

known to be or has been doing business; 

(B) Business address; 

(C) Business phone number, fax 

number, and e-mail address; 

(D) Employer identification number or 

other domestic tax or corporate 

identification number; and 

(E) For each branch, the information 

required in paragraphs (c)(6)(viii)(B) 

through (D) of this section, if applicable. 

(d) The voluntary notice shall list any 

filings with, or reports to, agencies of 

the United States Government that have 

been or will be made with respect to the 

transaction prior to its closing 

indicating the agencies concerned, the 

nature of the filing or report, the date on 

which it was filed or the estimated date 

by which it will be filed, and a relevant 

contact point and/or telephone number 

within the agency, if known. 

Example. Corporation A, a foreign person, 

intends to acquire Corporation X, which is 

wholly owned and controlled by a U.S. 

national and which has a Facility Security 

Clearance under the Department of Defense 

Industrial Security Program. See Department 

of Defense, ‘‘Industrial Security Regulation,’’

DOD 5220.22–R, and ‘‘Industrial Security 

Manual for Safeguarding Classified 

Information,’’ DOD 5220.22–M. Corporation 

X accordingly files a revised Form DD 441s, 

and enters into discussions with the Defense 

Investigative Service about effectively 

insulating its facilities from the foreign 

person. Corporation X may also have made 

filings with the Securities and Exchange 

Commission, the Department of Commerce, 

the Department of State, or other federal 

departments and agencies. Paragraph (d) of 

this section requires that certain specific 

information about these filings be reported to 

the Committee in a voluntary notice. 

(e) In the case of the establishment of 

a joint venture, information for the 

voluntary notice shall be prepared on 

the assumption that the foreign person 

that is party to the joint venture has 

made an acquisition of the existing U.S. 

business that the other party to the joint 

venture is contributing or transferring to 

the joint venture. The voluntary notice 

shall describe the name and address of 

the joint venture and the entities that 

established, or are establishing, the joint 

venture. 

(f) In the case of acquisitions of some 

but not all of the assets of a person, 

§ 800.402(c) requires submission of the 

specified information with respect to 

the assets in the United States that have 

been or are proposed to be acquired. 

(g) Persons filing a voluntary notice 

shall, with respect to the foreign person 

that is a party to the transaction, its 

immediate parent, the U.S. business that 

is the subject of the transaction, and 

each entity of which the foreign person 

is a parent, append to the voluntary 

notice the most recent annual report of 

each such entity, in English. Separate 

reports are not required for any entity 

whose financial results are included 

within the consolidated financial results 

stated in the annual report of any parent 

of any such entity, unless the 

transaction involves the acquisition of a 

U.S. business whose parent is not being 

acquired, in which case the notice shall 

include the most recent audited 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21877 

financial statement of the U.S. business 

that is the subject of the transaction. If 

a U.S. business does not prepare an 

annual report and its financial results 

are not included within the 

consolidated financial results stated in 

the annual report of a parent, the filing 

shall include, if available, the entity’s 

most recent audited financial statement 

(or, if an audited financial statement is 

not available, the unaudited financial 

statement). 

(h) Persons filing a voluntary notice 

shall, during the time that the matter is 

pending before the Committee or the 

President, promptly advise the Staff 

Chairperson of any material changes in 

plans, facts and circumstances 

addressed in the notice, and information 

provided or required to be provided to 

the Committee under § 800.402, and 

shall file amendments to the notice to 

reflect such material changes. Such 

amendments shall become part of the 

notice filed by such persons under 

§ 800.401, and the certification required 

under § 800.402(l) shall apply to such 

amendments. (See also § 800.701(d).) 

(i) Persons filing a voluntary notice 

shall include a copy of the most recent 

asset or stock purchase agreement or 

other document establishing the agreed 

terms of the transaction. 

(j) Persons filing a voluntary notice 

shall include: 

(1) An organizational chart illustrating 

all of the entities or individuals above 

the foreign person that is a party to the 

transaction up to the person or persons 

having ultimate control of that person, 

including the percentage of shares held 

by each; and 

(2) A full statement of the view of the 

person as to whether: 

(A) It is a foreign person; 

(B) It is controlled by a foreign 

government; and 

(C) The transaction has resulted or 

will result in control of a U.S. business 

by a foreign person, and the reasons for 

its view, focusing in particular on any 

powers (for example, by virtue of a 

shareholders agreement, contract, 

statute, or regulation) that the foreign 

person will have with regard to the U.S. 

business, and how those powers can or 

will be exercised. 

(k) Persons filing a voluntary notice 

shall include information as to whether: 

(1) Any party to the transaction is, or 

has been, a party to a mitigation 

agreement entered into or condition 

imposed under section 721, and if so, 

shall specify the date and purpose of 

such agreement or condition and the 

United States Government signatories; 

and 

(2) Any party to the transaction was 

ever party to a transaction previously 

notified to the Committee. 

(l) Each party filing a voluntary notice 

shall provide a certification of the notice 

consistent with § 800.201. A sample 

certification may be found on the 

Committee’s section of the Department 

of the Treasury Web site, available at 

http://www.treas.gov/offices/ 

international-affairs/cfius/index.shtml. 

(m) Persons filing a voluntary notice 

shall include with the notice a list 

identifying each document provided as 

part of the notice, including all 

documents provided as attachments or 

exhibits to the narrative response. 

§ 800.403 Deferral, rejection, or disposition 

of certain voluntary notices. 

(a) The Committee, acting through the 

Staff Chairperson, may: 

(1) Reject any voluntary notice that 

does not comply with § 800.402 and so 

inform the parties promptly in writing; 

(2) Reject in writing any voluntary 

notice at any time, and so inform the 

parties promptly in writing, if, after the 

notice has been submitted and before 

action by the Committee or the 

President has been concluded: 

(i) There is a material change in the 

transaction as to which notification has 

been made; or 

(ii) Information comes to light that 

contradicts material information 

provided in the notice by the parties; 

(3) Reject in writing any voluntary 

notice at any time after the notice has 

been accepted, and so inform the parties 

promptly in writing, if the party or 

parties that have submitted the 

voluntary notice do not provide followup information requested by the Staff 

Chairperson within two business days 

of the request, or within a longer time 

frame if the parties so request in writing 

and the Staff Chairperson grants that 

request in writing; or 

(4) Reject in writing any voluntary 

notice before the conclusion of a review 

or investigation and so inform the 

parties promptly in writing, if the party 

submitting the voluntary notice has not 

submitted the final certification 

required by § 800.701(d). 

(b) Notwithstanding the authority of 

the Staff Chairperson under paragraph 

(a) of this section to reject an incomplete 

notice, the Staff Chairperson may defer 

acceptance of the notice, and the 

beginning of the thirty-day review 

period, to obtain any information 

required under this section that has not 

been submitted by the notifying party or 

parties or other parties to the 

transaction. Where necessary to obtain 

such information, the Staff Chairperson 

may inform any non-notifying party or 

parties that notice has been filed with 

respect to a proposed transaction 

involving the party, and request that 

certain information required under this 

section, as specified by the Staff 

Chairperson, be provided to the 

Committee within seven days after 

receipt of the Staff Chairperson’s 

request. 

(c) The Staff Chairperson shall notify 

the parties when the Committee has 

found that the transaction that is the 

subject of a voluntary notice is not a 

covered transaction. 

Example 1. The Staff Chairperson receives 

a joint notice from Corporation A, a foreign 

person, and Corporation X, a company that 

is owned and controlled by U.S. nationals, 

with respect to Corporation A’s intent to 

purchase all of the shares of Corporation X. 

The joint notice does not contain any 

information described under § 800.402(d)(3) 

(iv) and (v) concerning classified materials 

and products or services supplied to the U.S. 

military services. The Staff Chairperson may 

reject the notice or defer the start of the 

thirty-day review period until the parties 

have supplied the omitted information. 

Example 2. Same facts as in first sentence 

of Example 1, except that the joint notice 

indicates that Corporation A does not intend 

to purchase Corporation X’s Division Y, 

which is engaged in classified work for a U.S. 

Government agency. Corporations A and X 

notify the Committee on the 25th day of the 

30-day notice period that Division Y will also 

be acquired by Corporation A. This fact 

constitutes a material change with respect to 

the transaction as originally notified, and the 

Staff Chairperson may reject the notice. 

Example 3. The Staff Chairperson receives 

a joint notice by Corporation A, a foreign 

person, and Corporation X, a company that 

is owned and controlled by U.S. nationals, 

indicating that Corporation A intends to 

purchase five percent of the voting securities 

of Corporation X. Under the particular facts 

and circumstances presented, the Committee 

concludes that Corporation A’s purchase of 

this interest in Corporation X could not result 

in foreign control of Corporation X. The Staff 

Chairperson shall advise the parties in 

writing that the transaction as presented is 

not subject to section 721. 

Example 4. The Staff Chairperson receives 

a voluntary notice involving the acquisition 

by Company A, a foreign person, of the entire 

interest in Company X, a U.S. business. The 

notice mentions the involvement of a second 

foreign person in the transaction, Company 

B, but states that Company B is merely a 

passive investor in the transaction. During 

the course of the review, the parties provide 

information that clarifies that Company B’s 

approval would be required before Company 

X can pursue certain lines of business. This 

contradicts the material assertion in the 

notice that Company B is a passive investor. 

The Committee may reject this notice 

without concluding review under section 

721. 

mstockstill on PROD1PC66 with PROPOSALS

21878 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

Subpart E—Committee Procedures: 

Review and Investigation 

§ 800.501 General. 

(a) The Committee’s review or 

investigation (if necessary) shall 

examine, as appropriate, whether: 

(1) The transaction is by or with any 

foreign person and could result in 

foreign control of a U.S. business; 

(2) There is credible evidence to 

support a belief that any foreign person 

exercising control of that U.S. business 

might take action that threatens to 

impair the national security of the 

United States; and 

(3) Provisions of law, other than 

section 721 and the International 

Emergency Economic Powers Act (50 

U.S.C. 1701–1706), provide adequate 

and appropriate authority to protect the 

national security of the United States. 

(b) During the thirty-day review 

period or during an investigation, the 

Staff Chairperson may invite the parties 

to a notified transaction to attend a 

meeting with the Committee staff to 

discuss and clarify issues pertaining to 

the transaction. During an investigation, 

a party to the investigated transaction 

may request a meeting with the 

Committee staff; such a request 

ordinarily will be granted. 

(c) The Staff Chairperson shall be the 

point of contact for receiving material 

filed with the Committee, including 

notices. 

(d) Where more than one lead agency 

is designated, communications on 

material matters between a party to the 

transaction and a lead agency shall 

include all lead agencies designated 

with regard to those matters. 

§ 800.502 Beginning of thirty-day review 

period. 

(a) The Staff Chairperson of the 

Committee shall accept a voluntary 

notice the next business day after the 

Staff Chairperson has: 

(1) Determined that the notice 

complies with § 800.402; and 

(2) Disseminated the notice to all 

members of the Committee. 

(b) A thirty-day period for review of 

a transaction shall commence on the 

date on which the voluntary notice has 

been accepted, agency notice has been 

received by the Staff Chairperson of the 

Committee, or the Chairperson of the 

Committee has requested a review 

pursuant to § 800.601(b). Such review 

shall end no later than the thirtieth day 

after it has commenced, or if the 

thirtieth day is not a business day, no 

later than the next business day after the 

thirtieth day. 

(c) The Staff Chairperson shall 

promptly and in writing advise all 

parties to a transaction that have filed a 

voluntary notice of: 

(1) The acceptance of the notice; 

(2) The date on which the review 

begins; and 

(3) The designation of any lead agency 

or agencies. 

(d) Within two business days after its 

receipt by the Staff Chairperson, the 

Staff Chairperson shall send written 

advice of an agency notice to the parties 

to a covered transaction. Such written 

advice shall identify the date on which 

the review began. 

(e) The Staff Chairperson shall 

promptly circulate to all Committee 

members any draft pre-filing notice, any 

agency notice, any accepted notice, and 

any subsequent information filed by the 

parties. 

§ 800.503 Determination of whether to 

undertake an investigation. 

(a) After a review of a covered 

transaction under § 800.502, the 

Committee shall undertake an 

investigation of any covered transaction 

if: 

(1) A member of the Committee (other 

than a member designated as ex officio 

under section 721(k)) advises the Staff 

Chairperson that the member believes 

that the transaction threatens to impair 

the national security of the United 

States and that the threat has not been 

mitigated; or 

(2) The lead agency recommends, and 

the Committee concurs, that an 

investigation be undertaken. 

(b) The Committee shall also 

undertake, after a review of a covered 

transaction under § 800.502, an 

investigation to determine the effects on 

national security of any covered 

transaction that: 

(1) Is a foreign government-controlled 

transaction; or 

(2) Would result in control by a 

foreign person of critical infrastructure 

of or within the United States, if the 

Committee determines that the 

transaction could impair the national 

security and such impairment has not 

been mitigated. 

(c) The Committee shall undertake an 

investigation as described in paragraph 

(b) of this section unless the 

Chairperson (or the Deputy Secretary of 

the Treasury) and the head of any lead 

agency (or his or her delegee at the 

Deputy Secretary or equivalent level) 

designated by the Chairperson 

determine at the conclusion of the 

review that such transaction will not 

impair the national security of the 

United States. 

§ 800.504 Determination not to undertake 

an investigation. 

If the Committee determines, during 

the review period described in 

§ 800.502, not to undertake an 

investigation of a notified covered 

transaction, action under section 721 

shall be concluded. An official at the 

Department of the Treasury shall 

promptly send written advice to the 

parties to a covered transaction of a 

determination of the Committee not to 

undertake an investigation, and to 

conclude action under section 721. 

§ 800.505 Commencement of 

investigation. 

(a) If it is determined that an 

investigation should be undertaken, 

such investigation shall commence no 

later than the end of the thirty-day 

review period described in § 800.502. 

(b) An official of the Department of 

the Treasury shall promptly send 

written advice to the parties to a 

covered transaction of the 

commencement of an investigation. 

§ 800.506 Completion or termination of 

investigation and report to the President. 

(a) The Committee shall complete an 

investigation no later than the forty-fifth 

day after the date the investigation 

commences, or, if the forty-fifth day is 

not a business day, no later than the 

next business day after the forty-fifth 

day. 

(b) Upon completion or termination of 

any investigation, the Committee shall 

send a report to the President requesting 

the President’s decision if: 

(1) The Committee recommends that 

the President suspend or prohibit the 

transaction; 

(2) The members of the Committee 

(other than a member designated as ex 

officio under section 721(k)) are unable 

to reach a decision on whether to 

recommend that the President suspend 

or prohibit the transaction; or 

(3) The Committee requests that the 

President make a determination with 

regard to the transaction. 

(c) In circumstances when the 

Committee sends a report to the 

President requesting the President’s 

decision upon completion or 

termination of an investigation, such 

report shall include information 

relevant to sections 721 (d)(4)(A) and 

(B), and shall present the Committee’s 

recommendation. If the Committee is 

unable to reach a decision to present a 

single recommendation to the President, 

the Chairperson shall submit a report of 

the Committee to the President setting 

forth the differing views and presenting 

the issues for decision. 

(d) If the Committee determines to 

conclude all deliberative action under 

mstockstill on PROD1PC66 with PROPOSALS

Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 21879 

section 721 with regard to a notified 

covered transaction without sending a 

report to the President upon completion 

or termination of an investigation, 

action under section 721 shall be 

concluded. An official at the 

Department of the Treasury shall 

promptly send written advice to the 

parties to a covered transaction of a 

determination to conclude action. 

§ 800.507 Withdrawal of notice. 

(a) A party (or parties) to a transaction 

that has filed notice under § 800.401(a) 

may, at any time prior to conclusion of 

all action under section 721, request in 

writing that such notice be withdrawn. 

Such request shall be directed to the 

Staff Chairperson and shall state the 

reasons why the request is being made. 

Such requests will ordinarily be 

granted, unless otherwise determined by 

the Committee. An official of the 

Department of the Treasury will 

promptly send written advice of the 

Committee’s decision to the parties. 

(b) Any request to withdraw an 

agency notice by the agency that filed it 

shall be in writing and shall be effective 

only upon approval by the Committee. 

An official of the Department of the 

Treasury shall provide written advice to 

the parties to the transaction of the 

Committee’s decision to approve the 

withdrawal request within two business 

days of the Committee’s decision. 

(c) In any case where a request to 

withdraw a notice is granted under 

paragraph (a) of this section: 

(1) The Staff Chairperson, in 

consultation with the Committee, shall 

establish, as appropriate: 

(i) A process for tracking actions that 

may be taken by any party to the 

covered transaction before notice is 

refiled under § 800.401; and 

(ii) Interim protections to address 

specific national security concerns with 

the transaction identified during the 

review or investigation of the 

transaction. 

(2) The Staff Chairperson shall specify 

a time frame, as appropriate, for the 

parties to resubmit a notice and shall 

provide written advice of that time 

frame to the parties. 

(d) Written notice of a covered 

transaction pursuant to paragraph (c)(2) 

of this section shall be deemed a new 

notice for purposes of the regulations in 

this part, including § 800.601. 

§ 800.508 Role of the Secretary of Labor. 

In response to a request from the 

Chairperson, the Secretary of Labor 

shall identify for the Committee any risk 

mitigation provisions proposed to or by 

the Committee that would violate U.S. 

labor laws. 

Subpart F—Finality of Action 

§ 800.601 Finality of actions under section 

721. 

(a) All authority available to the 

President or the Committee under 

section 721(d), including divestment 

authority, shall remain available at the 

discretion of the President with respect 

to covered transactions proposed or 

pending on or after the effective date. 

Such authority shall not be exercised if: 

(1) The Committee, through its Staff 

Chairperson, has in writing advised a 

party (or the parties) that a particular 

transaction, with respect to which 

voluntary notice has been filed is not a 

covered transaction; 

(2) The parties to the transaction have 

received written advice pursuant to 

§ 800.504 or § 800.506(d) that the 

Committee has concluded all action 

under section 721 with respect to the 

covered transaction; or 

(3) The President has previously 

announced, pursuant to section 721(d), 

his decision not to exercise his authority 

under section 721 with respect to the 

covered transaction. 

(b) Notwithstanding any other 

provision in the regulations in this part, 

and in addition to such other penalties 

as may be provided by law, in any case 

where one or more parties to a covered 

transaction submits false or misleading 

material information to the Committee, 

or omits material information, including 

relevant information that is supplied in 

response to provisions of § 800.402; that 

is requested specifically by the 

President or the Committee in the 

course of a review, investigation, or 

Presidential determination; or that is 

actually provided by a party: 

(1) The Committee may, consistent 

with sections 721(b)(1)(D)(ii) and 

(b)(1)(F), reopen its review of the 

transaction and exercise all its original 

authorities under section 721 with 

respect to the transaction, including 

revising any recommendation or 

recommendations submitted to the 

President; and 

(2) The President may take action 

under section 721 for such time as the 

President deems appropriate with 

respect to the covered transaction, and 

may revise actions earlier taken. 

(c) The Committee will generally not 

consider as material minor inaccuracies, 

omissions, or changes relating to 

financial or commercial factors not 

having a bearing on national security. 

(d) Divestment or other relief under 

section 721 shall not be available with 

respect to transactions that were 

completed prior to the effective date. 

Subpart G—Provision and Handling of 

Information 

§ 800.701 Obligation of parties to provide 

information. 

(a) Parties to a covered transaction 

that is notified under subpart D shall 

provide information to the Staff 

Chairperson that will enable the 

Committee to conduct a full review 

and/or investigation of the proposed 

transaction, and shall promptly advise 

the Staff Chairperson of any material 

changes in plans or information 

pursuant to § 800.402(h). If deemed 

necessary by the Committee, 

information may be obtained from 

parties to a covered transaction or other 

persons through subpoena or otherwise, 

pursuant to 50 U.S.C. App. 2155(a). 

(b) Documentary materials or 

information required or requested to be 

filed with the Committee under this part 

shall be submitted in English. 

Supplementary materials, such as 

annual reports, written in a foreign 

language, shall be submitted in certified 

English translation. 

(c) Any information filed with the 

Committee by a party to a covered 

transaction in connection with any 

action for which a report is required 

pursuant to section 721(l)(3)(B) with 

respect to the implementation of a 

mitigation agreement or condition 

described in section 721(l)(1)(A) shall be 

accompanied by a certification that 

complies with the requirements of 

section 721(n) and § 800.201. A sample 

certification may be found at the 

Committee’s section of the Department 

of the Treasury Web site at http:// 

www.treas.gov/offices/internationalaffairs/cfius/index.shtml. 

(d) At the conclusion of a review or 

investigation, each party that has filed 

additional information subsequent to 

the original notice shall file a final 

certification. (See § 800.201.) A sample 

certification may be found at the 

Committee’s section of the Department 

of the Treasury Web site at http:// 

www.treas.gov/offices/internationalaffairs/cfius/index.shtml. 

§ 800.702 Confidentiality. 

(a) Any information or documentary 

material filed with the Committee 

pursuant to this part shall be exempt 

from disclosure under 5 U.S.C. 552 and 

no such information or documentary 

material may be made public, except as 

may be relevant to any administrative or 

judicial action or proceeding. Nothing 

in this part shall be construed to prevent 

disclosure to either House of Congress 

or to any duly authorized committee or 

subcommittee of the Congress, in 

mstockstill on PROD1PC66 with PROPOSALS

21880 Federal Register / Vol. 73, No. 79 / Wednesday, April 23, 2008 / Proposed Rules 

accordance with subsections (b)(3)(B) 

and (g)(2)(A) of section 721. 

(b) In any case where a request to 

withdraw notice is granted under 

§ 800.507, or where notice has been 

rejected under § 800.403, § 800.702 shall 

continue to apply with respect to 

information and documentary material 

filed with the Committee. 

(c) Nothing in paragraph (a) of this 

section shall be interpreted to prohibit 

the public disclosure by a party of 

documentary material or information 

that it has filed with the Committee. 

Any such documentary material or 

information so disclosed may 

subsequently be reflected in the public 

statements of the Chairperson, who is 

authorized to communicate with the 

public and the Congress on behalf of the 

Committee. 

(d) The provisions of 50 U.S.C. App. 

2155(d) relating to fines and 

imprisonment shall apply with respect 

to the disclosure of information or 

documentary material filed with the 

Committee under these regulations. 

Subpart H—Penalties 

§ 800.801 Penalties. 

(a) Any person who, intentionally or 

through gross negligence, submits a 

material misstatement or omission in a 

notice or makes a false certification 

under § 800.402(k) or 800.701(c) may be 

liable to the United States for a civil 

penalty not to exceed $250,000 per 

violation. The amount of the penalty 

assessed for a violation shall be based 

on the nature of the violation. 

(b) Any person who, intentionally or 

through gross negligence, violates a 

material agreement or condition entered 

or agreed with the United States under 

section 721(l) may be liable to the 

United States for a civil penalty not to 

exceed $250,000 per violation or the 

value of the transaction. Any penalty 

assessed under this subsection shall be 

based on the nature of the violation and 

shall be separate and apart from any 

damages sought pursuant to a mitigation 

agreement under section 721(l), or any 

action taken under § 800.601(b). 

(c) A mitigation agreement entered 

into under section 721(l) may include a 

provision providing for liquidated or 

actual damages for breaches of the 

agreement by parties to the transaction. 

The Committee shall set the amount of 

any liquidated damages as a reasonable 

assessment of the harm to the national 

security that could result from a breach 

of the agreement. Any mitigation 

agreement containing a liquidated 

damages provision shall include a 

provision that the Committee will 

consider the severity of the breach in 

deciding whether to seek a lesser 

amount than that stipulated in the 

contract. 

(d) A determination to impose 

penalties under paragraphs (a) or (b) of 

this section must be made by the 

Committee. Notice of the penalty, 

including a written explanation of the 

penalized conduct and the amount of 

the penalty, shall be sent to the 

penalized party by U.S. mail. 

(e) Upon receiving notice of the 

imposition of a penalty under 

paragraphs (a) or (b) of this section, the 

penalized party may, within 15 days of 

receipt of the notice of the penalty, 

submit a written statement of appeal to 

the Staff Chairperson, including a 

defense, justification, or explanation for 

the penalized conduct. The Committee 

will review the appeal and issue a final 

decision within 15 days of receipt of the 

appeal. 

(f) The penalties authorized in 

paragraphs (a) and (b) of this section 

may be recovered in a civil action 

brought by the United States in federal 

district court. 

(g) The penalties available under this 

section are without prejudice to other 

penalties, civil or criminal, available 

under law. 

Appendix to Part 800—Preamble to 

Regulations on Mergers, Acquisition, 

and Takeovers by Foreign Persons 

(Published [date to be determined], 

2008.) 

[Text of Appendix will appear in the 

final rule.] 

Clay Lowery, 

Assistant Secretary (International Affairs). 

[FR Doc. 08–1172 Filed 4–21–08; 8:45 am] 

BILLING CODE 4810–25–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2008–0096] 

RIN 1625–AA00 

Safety Zone; Festival of Sail 2008 

Ship’s Parade; San Diego Harbor, San 

Diego, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes a 

safety zone, on the navigable waters of 

San Diego Bay in support of the Festival 

of Sail 2008 Ship’s Parade. This 

temporary safety zone is necessary to 

provide for the safety of the 

participants, crew, spectators, 

participating vessels, and other vessels 

and users of the waterway. Persons and 

vessels are prohibited from entering 

into, transiting through, or anchoring 

within this safety zone unless 

authorized by the Captain of the Port, or 

his designated representative. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

May 23, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2008–0096 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590–

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call Petty Officer Kristen Beer, 

USCG, Waterways Management, U.S. 

Coast Guard Sector San Diego at (619) 

278–7233. If you have questions on 

viewing or submitting material to the 

docket, call Renee V. Wright, Program 

Manager, Docket Operations, telephone 

202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation (DOT) 

to use the Docket Management Facility. 

Please see DOT’s ‘‘Privacy Act’’

paragraph below. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2008–0096), 

indicate the specific section of this 

document to which each comment 

mstockstill on PROD1PC66 with PROPOSALS