Archive for the ‘CFIUS’ Category


Nov

17

Proposed CFIUS Legislation: Good News for Cattle Prod Makers, Bad News for Cows


Posted by at 3:09 pm on November 17, 2017
Category: BISCFIUSDDTC

Cow by Kabsik Park [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5xQkWj [cropped]On November 8, 2017, the House and Senate introduced the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) proposing the first amendments to the CFIUS process since the Foreign Investment and National Security Act was passed in 2007. Although the bill has bi-partisan support and a good chance of passage, there are no guaranties on anything these days where Congress is concerned.

Of interest to export geeks is the proposed new definition of critical technologies to be considered by CFIUS during the review process. Section 3(a)(8) of the proposed legislation defines critical technologies to include:

(i) Defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations under subchapter M of chapter I of title 22, Code of Federal Regulations.

(ii) Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations under subchapter C of chapter VII of title 15, Code of Federal Regulations, and controlled—

(I) pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; or

(II) for reasons relating to regional stability or surreptitious listening.

What that means is that items controlled solely for Crime Control or AT reasons won’t be critical technologies and that CFIUS will not get worked up if a Chinese company seeks to buy the Cowpoke Cattle Prod (ECCN 0A985) Company in Wyoming. Nor should it care much if a foreign purchaser makes a bid for Missouri-based Ferguson Sjamboks and Tonfas (ECCN 0A9678) R US, Inc.

It is, of course, unlikely that CFIUS would have, either before or after any potential passage of the proposed legislation, considered the fact that the target made cattle prods (or tonfas) even though it has routinely examined transactions where other export-controlled goods were involved. But the proposed legislation, if it becomes law, would provide a statutory basis for CFIUS to ignore issues arising from the U.S. business producing AT- or CC-controlled items.

Photo Credit: Cow by Kabsik Park [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5xQkWj [cropped]. Copyright 2004 Kabsik Park

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Nov

22

Huawei Claims CCATS Filings Are Constructive CFIUS Notices


Posted by at 10:10 pm on November 22, 2010
Category: BISCFIUS

Huawei HQChinese telecom handset and equipment manufacturer Huawei has been forced by the Pentagon to seek retroactive approval from the Committee on Foreign Investment in the United States (“CFIUS”) for its $2 million acquisition of some of the assets of 3Leaf Systems, a California-based company that developed technology to link separate computers together to create more powerful computing solutions. If CFIUS determines that this acquisition could pose a threat to U.S. national security, it could require Huawei to divest those assets.

Retroactive requests for approval of acquisitions by CFIUS are extremely rare. Even more unusual is imposing this requirement on an asset purchase worth less than the value of many Manhattan condos. Huawei acquired only the intellectual property of 3Leaf and 15 of its 60 employees. Equipment, buildings and other hard assets of the company were not purchased.

Under section 800.302(c) of CFIUS’s regulations, an asset acquisition does not require CFIUS approval “if such part of an entity or assets do not constitute a U.S. business.” An example given by the regulations of a covered asset acquisition that constitutes acquisition of the business is an acquisition of “production facilities, customer lists, technology, and staff.” Under these standards, it seems hard to say that Huawei was required to obtain CFIUS approval.

The reason why I’m posting on this is a novel theory advanced by Huawei as to why retroactive approval is not needed in this case:

Huawei executives insist they weren’t trying to hide anything from the government and note that they filed with the Commerce Department seeking to classify the technology under export control requirements before the company completed the acquisition.

Leaving aside the issue that the Bureau of Industry and Security, the part of the Commerce Department that considers classification requests, has no power to stop an acquisition, the argument that a CCATS filing at BIS would give notice of a planned acquisition to the U.S. government is risible at best. Huawei might as well have argued that the unemployment compensation application filed by the employees left behind also constituted notice of its planned acquisition.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)