Authors:
Jennifer Diaz, President, Diaz Trade Law
Amber Pirson, Attorney, Diaz Trade Law
The Foreign Investment Risk Review Modernization Act (FIRRMA) created limited mandatory filing requirements—departing from the Committee on Foreign Investment in the United States (CFIUS)’s historically voluntary regime—and Treasury has continued to sharpen enforcement tools and penalties. Understanding when a filing is compulsory (and how to do it) reduces execution risk and avoids costly post‑closing surprises.
When a CFIUS filing is mandatory
Two categories trigger a mandatory submission (via declaration, with the option to file a full notice instead):
- Foreign government “substantial interest” in a TID U.S. business. If (i) a foreign government holds a 49%+ voting interest in the foreign acquirer, and (ii) that acquirer obtains a 25%+ voting interest (“substantial interest”) in a TID U.S. business (one involving critical technology, critical infrastructure, or sensitive personal data), a filing is mandatory.
- Critical technology + export authorization nexus. A filing is mandatory if the U.S. target produces, designs, tests, manufactures, fabricates, or develops a critical technology and a U.S. regulatory authorization (e.g., export license) would be required to transfer that technology to any relevant party to the transaction (including certain upstream owners).
Timing rule. For a mandatory filing, the parties must submit at least 30 days before closing. The date of closing or “completion date” is the earliest date upon which the foreign person acquired any of the equity interest. Therefore, if Company A acquired a 25% ownership interest in Company B on July 1, but its right to control Company B was deferred until after CFIUS reviews the transaction, the “completion date” for the transaction is July 1.
When is a filing voluntary?
Many other covered control transactions or covered investments that don’t meet the two mandatory triggers are voluntary, but remember, CFIUS actively pursues non‑notified deals and can ask (or order) the parties to file. Voluntary filings could result in a “safe harbor” letter if CFIUS concludes action (the letter would limit CFIUS from subsequently initiating a review of a transaction except in certain confined circumstances); such filings are often prudent for sensitive sectors, investors from higher‑risk jurisdictions, or transactions with proximity/data concerns.
What exactly is “critical technology”?
“Critical technologies” include International Traffic in Arms (ITAR)‑controlled defense articles and services, specified items included in the Commerce Control List set forth if Part 774 of the Export Administration Regulations (EAR)‑controlled items, certain nuclear items, agents and toxins, and emerging/foundational technologies controlled under Section 1758 of the Export Control Reform Act of 2018. Determining whether a license would be required (and the reason for which an article or service is controlled) is a classification exercise under the EAR/ITAR that often drives the critical technology prong of the mandatory filing analysis.
The process to report a mandatory transaction (step‑by‑step)
1) Decide on format: declaration or full notice.
For mandatory cases, parties may submit a short‑form declaration (30‑day assessment) or proceed directly to a full notice; many start with a declaration to preserve timing, then pivot to a notice if requested.
2) Prepare the submission package.
Declaration: Provide required content under 31 C.F.R. §800.404; file via Treasury’s Case Management System (CMS); CFIUS does not review draft declarations. Outcome options after 30 days include: clearance, a request for a full notice, a statement that CFIUS cannot conclude, or no action.
Notice: Collate documents to make a more robust, full‑form submission under §800.501-502; pre‑notice consultations with CFIUS and draft notices are encouraged to expedite acceptance. These steps both aid the Committee’s understanding of the transaction and provide an opportunity for the Committee to request additional information to be included in the formal notice. All information and documentary material submitted or filed with the Committee as part of pre-notice consultations is accorded confidential treatment under 31 C.F.R. § 800.802. Upon final, formal notice, a filing fee applies based on the deal value (no fee for declarations).
3) File via Case Management System (CMS) and certify.
All filings (and fees for notices) are submitted through CMS; each party must provide a certification by an authorized officer. CFIUS accepts a notice only after confirming the notice complies with federal regulation, the fee posts or has been waived, and a copy of the notice is shared with all Committee members.
4) Statutory timelines and likely asks.
Declarations: 30‑day assessment period from acceptance; parties typically must answer RFIs within two business days.
Notices: 45‑day review, then (if needed) a 45‑day investigation, and potentially a 15‑day presidential review. CFIUS starts the 45‑day clock only after accepting a complete notice and confirming fee receipt.
5) Outcomes & mitigation.
CFIUS may clear, impose mitigation, or recommend prohibition/divestiture. Recent data show fewer mitigations overall, but a sustained emphasis on enforcement and non‑notified outreach (including public tips).
Penalties & the enforcement climate
Failing to make a mandatory filing can result in penalties up to the value of the transaction; Treasury has also amplified its penalty framework for misstatements, omissions, and mitigation breaches—raising certain caps and accelerating mitigation‑negotiation timelines in recent rulemaking.
Conclusion
Navigating the line between mandatory and voluntary CFIUS filings demands a strategic, proactive approach. With enforcement increasing and penalties becoming more significant, companies cannot afford to overlook whether a transaction triggers a mandatory filing or assume that post-closing remediation will be sufficient where a voluntary filing is recommended.
Diaz Trade Law can help you navigate CFIUS requirements, reduce risk, and avoid costly post‑closing surprises. Contact us at info@diaztradelaw.com or 305-456-3830.
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